ECO402 Assignment Solution
Student Name ID
Question#1)
Solution
To calculate the price elasticity of supply (Es) when the price increases from Rs. 15,000 to Rs.
20,000, we can follow these steps:
Step 1: Calculate the change in quantity supplied.
Change in quantity supplied (ΔQs) = Quantity supplied at final price - Quantity supplied at initial
price
ΔQs = 14100 units - 10100 units = 4000 units
Step 2: Calculate the change in price.
Change in price (ΔP) = Final price - Initial price
ΔP = Rs. 20,000 - Rs. 15,000 = Rs. 5,000
Step 3: Calculate the percentage change in quantity supplied.
Percentage change in quantity supplied = (Change in quantity supplied / Quantity supplied at
initial price) * 100
Percentage change in quantity supplied = (4000 units / 10100 units) * 100 ≈ 39.60%
Step 4: Calculate the percentage change in price.
Percentage change in price = (Change in price / Initial price) * 100
Percentage change in price = (Rs. 5,000 / Rs. 15,000) * 100 ≈ 33.33%
Step 5: Calculate the price elasticity of supply.
Price elasticity of supply (Es) = Percentage change in quantity supplied / Percentage change in
price
Es = 39.60% / 33.33% ≈ 1.19
Thus, the price elasticity of supply of Oppo smartphones when its price increases from Rs.
15,000 to Rs. 20,000 is approximately 1.19. This means that the quantity supplied is relatively
responsive to price changes, indicating an elastic supply.
II. I will build a graph displaying the supply and demand curves to illustrate the effect of a rise in
production costs on the equilibrium price and quantity. A leftward shift in the supply curve
indicates rising prices.
Okay, on to the visual depiction.
Question#2)
Solution
The demand and supply curves for Oppo smartphones are shown in the graph that is located
above. The first point of equilibrium is shown by a red dot, which shows both the price and the
quantity that were in equilibrium at that moment. The new supply curve, which has moved to the
left due to a rise in manufacturing costs and indicates a decline in amount provided at each price
level, is represented by the dashed line and can be seen in the graph below.
Now that we've covered the first two questions, let's go on to the third one and determine how
the price elasticity of supply changes when the price goes from Rs. 15,000 to Rs. 20,000.
Question#3)
Solution
The price elasticity of supply (Es) is predicted to be about 1.19 if the price of Oppo smartphones
is increased from Rs. 15,000. This means that the supply of Oppo smartphones is flexible with
respect to price within the designated range. The percentage increase in the amount provided is
more than the percentage increase in price, indicating that Oppo has been very sensitive to price
fluctuations during the last several years.
