Economic Analysis and Strategies

BEO1105 Assignment
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Contents
Question 1:.................................................................................................................................3
Question 2:.................................................................................................................................5
Question 3:.................................................................................................................................8
Question 4:...............................................................................................................................10
Question 5:...............................................................................................................................12
References................................................................................................................................15
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Question 1:
a) The below diagram clearly presents the picture of the first option of efficient cars. Since,
with the lack of petrol, there is decrease in supply (of petrol), S (supply curve) shifted
leftwards to S2, the shift in supply curve lead to change in equilibrium point from E to E2
because there is fall in quantity available in the market (from Q to Q2) and resulted in
increase in price (Chand, 2017).
Figure1: describing decrease in supply of petrol and effect over quantity and price of petrol
Source: Chand, 2017
b)
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Figure 2: depicting the equilibrium process of substitute good (liquid gas) due to decrease in
supply of petrol (main product)
Source: Chand, 2017
The above graph depicts the shift of demand curve of liquid gas towards right due to a
decrease in the supply of the main product (petrol). Though there is no increase in the price
of petrol there is a shortage of supply of petrol and people will prefer to purchase liquid gas
for their cars. Thus, the demand will move from D to D1 and the quantity supplied will
increase from Q to Q1 and eventually the price will also increase from P to P1 of liquid gas
(substitute good) (Chand, 2017).
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