Consider an example of the Saudi clothing market; if the supply and demand represented as:

Qs = – 200 + 4p ;Qd = 800 – p

Solve:

Equilibrium price and equilibrium quantity and calculate total revenue?
If there were a price celling equal to 250 SAR per each cloth imposed, calculate the price elasticity of demand? Does this consider elastic, inelastic or unit elastic?Also, calculate the total revenue?
Now consider the shoes market; if the supply and demand is:
i.Qs = -100 + 3p ; Qd = 800 – 6p, calculate the equilibrium price and equilibrium quantity.Also, calculate Total Revenue.
ii.If there were a price celling of 120 SAR imposed per each pair of shoes, calculate the price elasticity of demand? Does the shoes consider elastic, inelastic or inelastic or unit elastic? Also calculate total revenue.
Compare the total revenue for the clothing market and the total revenue you found on the clothing market.Which one of product’s total revenue has been increased after the price have been increase and why?
Recall part a (the cloth market) Calculate the CS & PS.
Now, if the government impose sales tax equal to 12.5% on cloth, what is the CS, PS, government revenue, DWL and show this on the graph?
Without calculation, would you expect to have higher/ lower government revenue and DWL on shoes and why?
Assume that Saudi Arabia produce only two products; Coffee bean and plastic where are the price and quantity produced are:

Year

Coffee bean

Plastic

2018 (base year)

P= 10 SAR

Q= 1,000

P= 5 SAR

Q= 2,000

2019

P= 10 SAR

Q= 1,100

P= 5 SAR

Q= 2,100

2020

P= 12 SAR

Q= 900

P= 6 SAR

Q= 1,900

Calculate GDP deflator for the years 2018, 2019 and 2020.Also, calculate the Nominal and real GDP growth on 2019 & 2020, compare between them by explaining why they are different.Calculate the 2019 & 2020 inflation rates.

Sample Solution