# Economics Question – 20210627h

Q1- (4 points) Consider an example of the tea market; if the supply and demand represented as: Qs = 3p ;Qd = 20 – p Solve: Q2. (1 point) Assume that Saudi Arabia produce only two products; Peanut Butter and Tomato sauce where are the price and quantity produced are: Year Peanut Butter (cane) Tomato sauce (cane) 2018 (base year) P= 30 SAR Q= 500 P= 8 SAR Q= 5,000 2019 P= 30 SAR Q= 550 P= 8 SAR Q= 6,000 2020 P= 33 SAR Q= 450 P= 10 SAR Q= 4,500 Calculate GDP deflator for the years 2018, 2019 and 2020.Also, calculate the Nominal and real GDP growth on 2019 & 2020, compare between them by explaining why they are different.Calculate the 2019 & 2020 inflation rates. Requirements: not long Show all works for calculation, final result will not be accepted without showing how you reach it. Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions Equilibrium price and equilibrium quantity and calculate total revenue? If there were a price celling equal to 6 SAR per each cup of tea imposed, calculate the price elasticity of demand? Does this consider elastic, inelastic or unit elastic?Also, calculate the total revenue? Now consider the coffee market; if the supply and demand is: Compare the total revenue between tea and coffee.Which one of product’s total revenue has been increased after the price have been increase and why?Explain in words and show the difference in numbers as well. Recall part a (tea) Calculate the CS & PS. Hint; you need to set Qs=0 & Qd=0 to find the intercept and calculate the CS, PS. then solve for P to find the intercept and calculate the CS, PS. Where the CS is the area between the intercept for demand and the equilibrium price you found on part a.Do not forget that this area is a triangle so carefully calculate the area.The same thing for PS. Now, if the government impose a huge sales tax equal to 80 % on tea, what is the CS, PS, government revenue and DWL?Hint; price paid by the buyer equal 8 SAR and price received by seller equal4 SAR, the difference is the tax per cup of tea.The intercept points for the supply and demand on this part are the same as the ones on part e. To find the quantity, plug either the price for the buyer on the demand curve formula or the price for the seller on supply curve formula.Also, remember CS, PS & DWL have triangle area, whereas tax revenue has rectangular area.Graph this manually so you can easily find the answer. Without calculation, would you expect to have higher/ lower government revenue and DWL on coffee and why?

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