Question

QUESTION 1

a.Due to the emergence of Covid-19, the government of Ghana locked down some selected cities in the country. Critically examine the effect of the lockdown on the equilibrium price and quantities of goods and services.

b. Use a diagram to illustrate the effect of an increase in supply on equilibrium price and quantity .

c. With the aid of a diagram, illustrate how to calculate consumer surplus .

Answer 1

Ans) a) Due to lockdown, many factories and shops were forced to shut. As a result, supply decreased. With decrease in supply, price will increase while quantity will decrease.

b) When supply increases, supply curve shifts to the right and price decreases while quantity increases.

c)

Consumer surplus is pink shaded triangle. So, the area of triangle is consumer surplus.

Therefore, consumer surplus = 1/2 × height × base

Consumer surplus = 1/2 × (P - Pe) × Qe