Tutorial Sheet -1

UHU-081
Engineering Economics
Q1. Demand and supply functions for a consumer product are;
QD = 5000-6P
QS = 4P
Determine equilibrium price and quantity.
Q2. Demand and supply functions are
QD= !00000-4P
QS = 6P
"alculate equilibrium price and quantit y.
Q3. "alculate price elasticity of demand #$en a rise in price from %s. !0 to
%s.!&' lo#er its demand from !000 units to (00 units in a local store.
Q4. )$e sales data of a boo* publis$in+ company produces a demand
function as Q = 5000-50P
,rom t$is demand equation' -nd
Demand sc$edule and demand cur.e
/o. of boo*s sold at &5
Price for sellin+ &500 copies
Price for 0ero sale
Sales at 0ero price
Q5. 12plain t$e e3ect on mar*et price and quantity in t$e mar*et for mobile
$andsets of follo#in+.
"onsumer incomes rises
)ec$nical impro.ement decreases cost of production
Price of landline calls falls
Q6. 4se demand and supply cur.e to analy0e #$at is $appenin+ in eac$ of
t$e follo#in+ case.
Price of co3ee $as risen because of a frost in 5ra0il reducin+ t$e co3ee
crop.
,urt$er fall in c$ip prices $a.e led to a reduction in t$e price of laptop.
Tutorial Sheet -2
UHU-081
Engineering Economics
Q1. "alculate t$e elasticity of demand for t$e demand cur.e P= !00-5Q at eac$ of
t$e follo#in+ price and quantity le.els
P =60 and Q=&
P = 50 and Q = !0
P=5 and Q=!6
Q2. De-ne t$e elasticity of demand and e2plain #$y t$is concept s$ould be of
interest to anyone in business #$o $as to ma*e a c$oice about t$e price for sellin+
product.
Q3. )$e Serpell %eport 7!6(89 on %ail#ay ,inances in 1n+land measured price
elasticity of demand for rail ser.ices on some routes to be fairly inelastic 7-0.!59;
$ence' su++ested fares rise of 40: for ;ondon "ommuters. <n t$is case' #or* out
t$e re.enue e3ect if fares are raised from =!0 to =!4 and daily !000 passen+ers are
tra.ellin+ on t$is route. S$ould t$e aut$orities accept t$is su++estion>
Q4. Pana.ision' a )? manufacturin+ company' is plannin+ to increase t$e price of
its tele.ision sets by !0: ne2t year. )$e economic report of t$e country $as
forecasted rise in per capita income by 5: durin+ t$is period. Pana.ision economic
ad.isor $as estimated price elasticity for t$e )? set at 7-!.49 and income elasticity
at &.&. )$e Pana.ision currently sells 50'000 )? sets.
@i.e t$e forecast for t$e sales in ne2t period
<s it ad.isable to raise t$e price #$en eac$ )? set is currently priced at %s.
!0000.
Q5. Do you think the price elasticity of demand for Ford sport-utility vehicles (SUVs) will increase,
decrease, or remain the same when each of the following events occurs !"plain your answer#
a. $ther car manufacturers, such as %eneral &otors, decide to make and sell SUVs#
b. SUVs produced in foreign countries are 'anned from the (merican market#
c. Due to ad campaigns, (mericans 'elieve that SUVs are much safer than ordinary passenger cars#
d. )he time period over which you measure the elasticity lengthens# During that longer time, new models
such as four-wheel-drive cargo vans appear#
Q.6 (ma*on#com, the online 'ookseller, wants to increase its total revenue# $ne strategy is to offer a +,-
discount on every 'ook it sells# (ma*on#com knows that its customers can 'e divided into two distinct
groups according to their likely responses to the discount# )he accompanying ta'le shows how the two
groups respond to the discount#
a# Using the midpoint method, calculate the price elasticities of demand for group ( and group .#
'# !"plain how the discount will affect total revenue from each group#
c# Suppose (ma*on#com knows whicyyh group each customer 'elongs to when he logs on and can
choose whether or not to offer the +,- discount# /f (ma*on#com wants to increase its total revenue,
should discounts 'e offered to group ( or to group ., to neither group, or to 'oth groups
Tutorial Sheet -3
UHU-081
Engineering Economics
Question-1. Fit a linear regression line to the following data and estimate the demand at a price 01s 2,
3ear 4,,, 4,,+ 4,,4 4,,2 4,,5 4,,6 4,,7 4,,8 4,,9 4,,: 4,+, 4,++
;rice
(1s#)
+6 +6 +4 47 +9 +4 9 29 47 +: 4: 44
Sales
(<,,,
units)
64 57 29 28 28 28 25 46 44 44 4, +5
Question- 2 )he sales department of a firm is planning to e"pand sales of 1s# +, =akhs# )he consultant to the sales
department points out that in the past this firm>s sales proceeds and advertisement a very high correlation of ?#86#
)he past data revealed that firm>s average sales per year has 'een 1s# 5 =akhs with a variance of 1s#2,,,, and its
average annual advertisement e"penditure of 1s# + =akh with variance of 1s# +,,,,# @ow much advertising
e"penditure this firm must, therefore, incur to achieve sales target#
Question-3 From the following data find out the trend eAuation for sales as per least sAuare method of )imes Series
(nalysis# (lso proBect the sales in units for ne"t five years#
3ear 4,,, 4,,+ 4,,4 4,,2 4,,5 4,,6 4,,7
)otal Sales
(in units)
++6, +,4, 2,6, 2,,, :6, 2,7, 5,2,
Question -4 Demand function or the product of shoe making company is given C0-#,8,;?,#56(# Dhere (;0 ;rice
per pair and (0 (dvertisement cost per unit)# )he Eompany sells 6,,,, pairs of shoes per annum at 1s# 7,, per
pair# Dhat will the annual sales if the company spends 1s# + =akh on advertisement#
Question-5 From the following information from the yaer 4,,, to 4,++# 3ou are reAuired to find out the trend value
of sales as per 2 years and 6 years moving average method# (lso plot the original and trend value on the graph paper#
3ear 4,,, 4,,+ 4,,4 4,,2 4,,5 4,,6 4,,7 4,,8 4,,9 4,,: 4,+, 4,++
Sales
(<,,,
units)
64 57 29 28 28 28 25 46 44 44 4, +5