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11-06-2012, 07:57 PM
ECO401 Economics Assignment No.1 Fall Semester 2012
ECONOMICS (ECO401)
FALL 2012
ASSIGNMENT NO. 1
DUE DATE: 12 NOVEMBER 2012
MARKS: 20
ASSIGNMENT:
Background:
Toyota is one of the world's biggest manufacturers of motor vehicles. It has a
worldwide market spreading from Asia to North America, Europe and other parts
of the world. Toyota has different designated models which are produced
specifically for the country. Depending upon the market demand and supply
conditions, Toyota keep on revising their prices.
The case:
Suppose demand and supply conditions of Toyota cars in year 2011 have been
given below.
Month Total Price
charged In
‘000000000
Total
Quantity
sold In ‘000
Total
Quantity
Demanded
In ‘000
July 2.6 3.33 3.50
August 2.4 3.06 3.20
September 2.8 3.30 3.60
October 2.9 3.37 3.80
November 3.1 3.88 4.20
December 2.9 3.74 4.15
It has been observed that the sales of Indus Motor Company’s (IMC) Toyota
cars– the highest selling cars in the country – decreased 24% in August 2012 to
2,800 units, from 3,060 units in August 2011. There are many reasons of
declining trend in the sale of Toyota cars.
One of the main reasons is that during the last six months almost 25,000 used
vehicles have been imported, amounting to 25 per cent of the total market
demand for automobiles in the country and causing an annual loss of sales
revenue worth Rs.20 billion to the parts-manufacturing industry.
Another reason is that the Indus Motors was short-sighted in making the
necessary change to bring cars to match the Euro-II standards and thusly, had to
increase the prices overnight when the deadline of July to swap to Euro-II
standards had passed and companies hastily switched over to the new Euro
standards.
Requirement:
Part A:
Keeping in view the demand supply conditions of Toyota cars given in the table:
a. Calculate the point elasticity of demand and supply of Toyota cars from
August-July 2011.
b. Calculate the Arc elasticity of demand and supply of Toyota cars from
December-July 2011.
Marks :( 5+5)
Part B:
a. Why the sales revenue of Toyota cars has decreased in 2012? Elaborate
your answer by keeping in view the calculated answers in part A.
b. What will be the effect on the equilibrium situation of Toyota cars demand
curve as Toyota did not converted their cars on Euro-II standards? Illustrate
graphically by taking supposed equilibrium condition of Toyota cars.
c. As an Economic advisor, if you suggest Pakistan’s department of
transportation to impose costly regulation on manufacturers of imported in
order to facilitate domestic infant industry. What will be the impact of costly
regulation on the equilibrium situation of Toyota cars? Illustrate graphically.
Marks :( 4+3+3)
IMPORTANT:
24 hours extra / grace period after the due date is 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.
IMPORTANT INSTRUCTIONS/ SOLUTION GUIDELINES/ SPECIAL INSTRUCTIONS
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
· Make sure to upload the solution file before the due date on VULMS.
· Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
· Use the font style “Times New Roman” or “Arial” and font size “12”.
· It is advised to compose your document in MS-Word format.
· You may also compose your assignment in Open Office format.
· Use black and blue font colors only.
REFERENCING GuIDELINES:
· Use APA style for referencing and citation. For guidance search “APA
reference style” in Google and read various website containing information
for better understanding or visit
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0),
if:
· It is submitted after the due date.
· The file you uploaded does not open or is corrupt.
· It is in any format other than MS-Word or Open Office; e.g. Excel,
PowerPoint, PDF etc.
· It is cheated or copied from other students, internet, books, journals etc.
ECONOMICS (ECO401)
FALL 2012
ASSIGNMENT NO. 1
DUE DATE: 12 NOVEMBER 2012
MARKS: 20
ASSIGNMENT:
Background:
Toyota is one of the world's biggest manufacturers of motor vehicles. It has a
worldwide market spreading from Asia to North America, Europe and other parts
of the world. Toyota has different designated models which are produced
specifically for the country. Depending upon the market demand and supply
conditions, Toyota keep on revising their prices.
The case:
Suppose demand and supply conditions of Toyota cars in year 2011 have been
given below.
Month Total Price
charged In
‘000000000
Total
Quantity
sold In ‘000
Total
Quantity
Demanded
In ‘000
July 2.6 3.33 3.50
August 2.4 3.06 3.20
September 2.8 3.30 3.60
October 2.9 3.37 3.80
November 3.1 3.88 4.20
December 2.9 3.74 4.15
It has been observed that the sales of Indus Motor Company’s (IMC) Toyota
cars– the highest selling cars in the country – decreased 24% in August 2012 to
2,800 units, from 3,060 units in August 2011. There are many reasons of
declining trend in the sale of Toyota cars.
One of the main reasons is that during the last six months almost 25,000 used
vehicles have been imported, amounting to 25 per cent of the total market
demand for automobiles in the country and causing an annual loss of sales
revenue worth Rs.20 billion to the parts-manufacturing industry.
Another reason is that the Indus Motors was short-sighted in making the
necessary change to bring cars to match the Euro-II standards and thusly, had to
increase the prices overnight when the deadline of July to swap to Euro-II
standards had passed and companies hastily switched over to the new Euro
standards.
Requirement:
Part A:
Keeping in view the demand supply conditions of Toyota cars given in the table:
a. Calculate the point elasticity of demand and supply of Toyota cars from
August-July 2011.
b. Calculate the Arc elasticity of demand and supply of Toyota cars from
December-July 2011.
Marks :( 5+5)
Part B:
a. Why the sales revenue of Toyota cars has decreased in 2012? Elaborate
your answer by keeping in view the calculated answers in part A.
b. What will be the effect on the equilibrium situation of Toyota cars demand
curve as Toyota did not converted their cars on Euro-II standards? Illustrate
graphically by taking supposed equilibrium condition of Toyota cars.
c. As an Economic advisor, if you suggest Pakistan’s department of
transportation to impose costly regulation on manufacturers of imported in
order to facilitate domestic infant industry. What will be the impact of costly
regulation on the equilibrium situation of Toyota cars? Illustrate graphically.
Marks :( 4+3+3)
IMPORTANT:
24 hours extra / grace period after the due date is 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.
IMPORTANT INSTRUCTIONS/ SOLUTION GUIDELINES/ SPECIAL INSTRUCTIONS
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
· Make sure to upload the solution file before the due date on VULMS.
· Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
· Use the font style “Times New Roman” or “Arial” and font size “12”.
· It is advised to compose your document in MS-Word format.
· You may also compose your assignment in Open Office format.
· Use black and blue font colors only.
REFERENCING GuIDELINES:
· Use APA style for referencing and citation. For guidance search “APA
reference style” in Google and read various website containing information
for better understanding or visit
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0),
if:
· It is submitted after the due date.
· The file you uploaded does not open or is corrupt.
· It is in any format other than MS-Word or Open Office; e.g. Excel,
PowerPoint, PDF etc.
· It is cheated or copied from other students, internet, books, journals etc.