Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments?

A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exit is permitted. Explain.

Suppose the demand and supply curve of commodity X in a perfectly competitive market are given by:

q^D = 700 – p

q^S = 500 + 3p for p ≥ 15

= 0 for 0 ≤ p < 15

Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?

Considering the same demand curve as in exercise 22, now let us allow for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained as

(a) What is the significance of p = 20?

(b) At what price will the market for X be in equilibrium? State the reason for your answer.

(c) Calculate the equilibrium quantity and number of firms.

Suppose the demand and supply curves of salt are given by:

q^D = 1,000 – p q^S = 700 + 2p

(a) Find the equilibrium price and quantity.

(b) Now suppose that the price of an input used to produce salt has increased so that the new supply curve is

q^S = 400 + 2p

How does the equilibrium price and quantity change? Does the change conform to your expectation?

(c) Suppose the government has imposed a tax of Rs 3 per unit of sale of salt. How does it affect the equilibrium price and quantity?