Draw the market demand and supply curves

Reference no: EM1396432

You are given the following information in relation to the market demand and supply of Ford cars:

Ford Cars: Market Demand and Supply

Price ($)	Quantity demanded/sold	Quantity supplied	Price elasticity of demand	Total Revenue
20,000	40,000	10,000
25,000	35,000	15,000
30,000	30,000	20,000
35,000	25,000	25,000
40,000	20,000	30,000
45,000	15,000	35,000
50,000	10,000	40,000

(i) Draw the market Demand and Supply curves (on the same graph) for Ford.

(ii) What is the market equilibrium price and quantity?

(iii) Explain what you will observe in the market if the Ford car price is set at a higher than equilibrium price.

(iv). suppose you are managing director of Ford Australia, and you are wondering whether or not to cut the price of Ford cars to increase your total revenue from sales. Explain how your knowledge of elasticity of demand can help you make this decision. Complete the last two columns of the above table and also draw a graph to explain your answer.

(v). suppose car industry is very competitive and Ford has been losing its competitiveness in the car market. Suppose that the government is providing substantial financial support to Ford manufacturers with the view that it will improve Ford's competitiveness. Evaluate the merits and demerits of this government policy measure.

Reference no: EM1396432

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