Graded Discussion (10%)Graded Assignment Descriptions, Rubrics and GuidelinesAssignment Description and Instructions

Units Covered 1 – 3

Weighting: 10% of your grade

Final mark Computation: */ 70 x 10 =

Answer all questions andshow all your workfor fullmarks

.Each student must submit their own individual work. Plagiarism will bepenalized.

Upload your assignment as a Word document. The submitted Microsoft Word document shouldconsist of the following: 1.5-line spacing, 12-point font, and scholarly references.

You are expected to use Microsoft equation tool where needed to show all equationsor notations. Question 1 is worth 25marksQuestion 2 is worth 25marksQuestion 3is worth 15marksParticipation / Responding to Peersonly on Question 2 (b) or 3 (b). 5 marksTotal marks 70marksRelated Course Objectives:

•Evaluate and critique the methodology of macroeconomic analysis and apply thismethodology to economic policy analysis.

•Explain and discuss the nature of demand and supply and their interaction as theyrelate to the workings of a market system.

•Describe and explain the concept of elasticity and show how it is applied at the levelof the government with respect to the setting of prices for various types of goods andservices.

Question 1:

Suppose you are given the followinginformation:Qs= 100 + 3P Qd= 400 –2Pwhere Qsis the quantity supplied, Qdis the quantity demanded and P is price.a.From this information compute equilibrium priceandquantity. [6marks]b.Now suppose that a tax is placed on buyers so that Qd= 400 –(2P + T) where T is taxes. If T = 15, solve for the new equilibrium priceandquantity. (Note: You are solving for the equilibrium price for sellers and buyers). [9marks]c.How does a tax on a good affect the price paid by buyers, price receive by sellers, and the quantity sold? [5marks]d.Suppose the government imposesa $10 tax per pack of cigarettes, and the supply for cigarettes are more elastic than demand. What will be the effect of this tax on both the buyer and seller? [5marks]Question 2 a.Definethe priceelasticityof demand andstatethe formula for thepriceof elasticityof demand. [5marks]b.Explain whytheconceptpriceelasticityshould beof interest to thosein business whohave choices to makeabout thepriceat which to selltheirproducts. [10marks]c.As the price of good X rises from $10 to $12, the quantity demanded of good Y rises from 100 units to 114 units. i. What is the cross elasticity of demand?[5 marks]ii. Are X and Y substitutes or complements?Explain your answer [5 marks]Question 3a.List and define two types of price controls that government can use to regulate prices. [5marks]b.“When government laws regulate prices instead of letting market forces determine prices, it undermines the rationing function of competitive prices.” Discuss briefly the impact of this statement in terms of the two types of price controls chosen in 3(a).