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# ECO401 ASSIGNMENT NO 01 Solution Fall 2016

### ECO401 ASSIGNMENT NO 01 Fall 2016

Here is the Solution of ECO401 – Economics - Assignment No. 1. This is to inform that Assignment No. 1 has been opened due date of assignment submission will be NOVEMBER 21, 2016.

A 24 hours extra/grace period after the due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies; and above mentioned due date should always be treated as final to avoid any inconvenience.

### ECO401 ASSIGNMENT NO 01

ECONOMICS (ECO401) ASSIGNMENT NO. 01
DUE DATE: NOVEMBER 21, 2016
MARKS: 20

### The Case:

Uber Technologies Inc. is an American worldwide online transportation network company
whose headquarter is in San Francisco, California. This company was established in 2009. It developed markets over 66 countries and 507 cities all over the world. Those people who have cars can register with this company and can earn money. Services of this company are also beneficial for the consumers because fare is very low. This company also started services in Pakistan in March 2016. Uber service demand is increasing day by day and car holders are also getting registration. Suppose the Uber Company in Pakistan is facing the following demand and supply functions:
Qd = 4000-4P
Qs= 1000+P
Where ‘P’ is the price of fare per ride and ‘Qd’ is quantity demanded in terms of number of cars
demanded by consumers. ‘Qs’ is number of cars offered by company.

### ECO401 Assignment Requirements:

1. Find equilibrium price and equilibrium quantity of cars. Also show equilibrium condition with the help of graph.
2. Calculate price elasticity of demand using point elasticity method when the company is in equilibrium and interpret the result.
3. What will be the effect on the equilibrium situation of the company if fuel prices increase remarkably in the market? Illustrate graphically.
(Marks: a: 2+2+3, b: 5+3, c: 5)

### ECO401 ASSIGNMENT IMPORTANT Note:

24 hours extra / grace period after the due date are usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Also Read: CS506 Assignment no 1 Solution Fall 2016

### ECO401 ASSIGNMENT IMPORTANT INSTRUCTIONS:

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### ECO401 ASSIGNMENT RULES FOR MARKING

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Dear students! As you know that Pre Mid-Term semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.

Fall 2016_ECO401_1.pdf, 170 KB

#### ECO401 ASSIGNMENT NO 01 Solution

Here is the Solution of ECO401 Assignment Fall 2016

#### ECO-401 Assignment Question no 1 Solution

Find equilibrium price and equilibrium quantity of cars. Also show equilibrium condition with the help of graph.

Solution:

Qd= 4000-4P
Qs= 1000+P
Solution:
Qd = Qs
So ,
4000 - 4P = 1000 + P
4000-1000 = 4P + P
3000 = 5P
P = 3000/5
P = 600
Now
Qd = 4000 -4(600)
= 4000 - 2400
= 1600
and
Qs = 1000 + 600
= 1600
So
Equilibrium Price is 600
Equilibrium quantity is 1600

#### ECO-401 Assignment Question no 2 Solution

Calculate price elasticity of demand using point elasticity method when the company is in equilibrium and interpret the result.

Solution:
Here is an example demand curve: Q = 4,000 - 4P
Given this demand curve we have to figure out what the point price elasticity of demand is at P = 600 and P = 60.
First we need to obtain the derivative of the demand function when it's expressed with Q as a function of P. Since quantity goes down by 4 each time price goes up by 1,
This gives us (ΔQ/ΔP)= -4
Now
= (-4) X (600/1600)
= -1.5
And these results make sense, first, because they are negative (downward sloping demand) and second, because the higher level results in a relatively more price elasticity of demand measure

#### ECO-401 Assignment Question no 3 Solution

What will be the effect on the equilibrium situation of the company if fuel prices increase remarkably in the market? Illustrate graphically.

Solution:
Upward shifts in the supply and demand curves affect the equilibrium price and quantity. If the supply curve shifts upward, meaning supply decreases but demand holds steady, the equilibrium price increases but the quantity.