Scribd Logo
Upload

Welcome to Scribd!

  • 3 views

    Economic Assignment

    Uploaded by

    farrukhwahla1
    Economic basic problem Assignment for vu students

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Economic Assignment

    Uploaded by

    farrukhwahla1
    3 views3 pages
    Economic basic problem Assignment for vu students

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Economic basic problem Assignment for vu students

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    3 views3 pages

    Economic Assignment

    Uploaded by

    farrukhwahla1
    Economic basic problem Assignment for vu students

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 3

     Assignment No 1 of Economics

    Title: Analysis of Cola Next’s Market Equilibrium, Demand, and


    Supply Elasticities

    Introduction:-

    Mezan Beverages Private Limited introduced Cola Next in March 2016,


    aiming to offer a local alternative to imported brands. With growing demand,
    Cola Next has expanded rapidly across Pakistan, often exceeding production
    capacity to meet the surging demand. In this analysis, we examine Cola
    Next’s market equilibrium, supply and demand changes, and elasticities.

    1. Initial Equilibrium Price and Quantity for Cola Next

    The initial equilibrium occurs when the quantity demanded is equal to


    quantity supply:

    Given:-

    Demand function =Qd=9900-10p

    Demand supply=Qs=50p

    Set Qd=Qs

    9900-10p=50p

    9900=60p

    P=9900/60=165

    Substitute p=165 into either

    Q=50×165=8250

    Thus the initial Equilibrium is 165 and initial equilibrium quantity is 8250.

    2.New equilibrium price and quantity after supply increased:-

    With ths supply increased the new supply function is

    Qs=50p + 8000

    Set the new Qd=Qs equilibrium

    9900-10p = 50p+8000
    9900-8000 = 50p+10p

    1900 = 60p

    P=1900/60

    P=31.67

    Substitute p into the function as

    Q=50×31.67+8000=9583.5

    The new equilibrium price is approximately 31.67 and the new equilibrium
    quantity is 9583.5.

    3.Price elasticity of demand and supply at initail equilibrium:-

    To calculate the formuals we use following formulas

    Price Elasticity of Demand Ed:

    Ed=dQd/dp × P/Q

    Price Elasticity of Supply Es:

    Es=dQs/ds × P/Q

    From the demand function

    Qd=9900-10p

    dQd/dp = -10

    Using initial Equilibrium values P=165 and Q=8250

    Demand Elasticity

    Ed=-10. 165/8250

    =-0.2

    Demand Supply

    Es=50.165/8250

    =1

    Interpretation:
    The demand elasticity of -0.2 indicates inelastic demand, meaning a change
    in price leads to a smaller percentage change in quantity demanded.

    The supply elasticity of 1 indicates unit elastic supply, meaning a 1% change


    in price leads to a 1% change in quantity supplied.

    Conclusion

    Through this analysis, we find Cola Next’s initial and adjusted market
    equilibrium points. As demand increases, production expands to meet
    consumer needs, lowering the equilibrium price and raising the equilibrium
    quantity. The demand and supply elasticities reveal that demand is inelastic,
    while supply responds proportionately to price changes, reflecting the
    beverage’s competitive positioning in a growing market.

    You might also like