Consider Figure 1 below, which depicts the rubber market in Malaysia. At the initial market equilibrium, the total quant
Posted: Sun May 29, 2022 7:59 pm
Consider Figure 1 below, which depicts the rubber market in
Malaysia. At the initial market equilibrium, the total quantity
produced is 500 kg per year and the average price is RM7 per
kg.
Figure 2: Fall in supply due to weather conditions
There is a sudden and drastic change in weather conditions,
causing the supply of rubber to fall from S to S’ (Figure 2 above).
Compute the price elasticity of demand, and comment on the degree
of elasticity (10 marks)
Seeing that prices have increased to RM17, the government
considers setting a price ceiling policy to stabilize prices.
Explain the effects of this policy if the price is fixed at RM18 (5
marks)
Elaborate on the effects of the price ceiling policy if the
price is fixed at RM10. Explain if your answer differs from part
(d) (15 marks)
Average Price RM17 RM10 600 1000 is S D* Quantity of rubber (kg)
Malaysia. At the initial market equilibrium, the total quantity
produced is 500 kg per year and the average price is RM7 per
kg.
Figure 2: Fall in supply due to weather conditions
- Consider Figure 1 Below Which Depicts The Rubber Market In Malaysia At The Initial Market Equilibrium The Total Quant 1 (18.35 KiB) Viewed 41 times
causing the supply of rubber to fall from S to S’ (Figure 2 above).
Compute the price elasticity of demand, and comment on the degree
of elasticity (10 marks)
Seeing that prices have increased to RM17, the government
considers setting a price ceiling policy to stabilize prices.
Explain the effects of this policy if the price is fixed at RM18 (5
marks)
Elaborate on the effects of the price ceiling policy if the
price is fixed at RM10. Explain if your answer differs from part
(d) (15 marks)
Average Price RM17 RM10 600 1000 is S D* Quantity of rubber (kg)