The local sports goods manufacturing industry is one of the major source of foreign exchange earnings of Pakistan. At present, there are more than 2000 units, mostly on small scale in operation, with an installed capacity of Rs.20 billion per annum. The units are operating on single-shift basis. Sports goods worth US$261.148 million were exported in the year 2012. The industry enjoys a low markup rate of about 7% on loans and has an easy access to the European and US markets. Let the demand and supply functions of sports goods industry of Pakistan are:
Qd = 17000 –6P
Qs = 900 + 8P
However, due to increased competition by countries such as China, India and South Korea the industry can no longer enjoy the profit; it did in the region earlier. These countries might not have the seasoned labor of Sialkot but they can compete Pakistan and meet any supply order on the basis of their research and development resources and uninterrupted power supplies. But in Pakistan due to shortage of electricity, research and development price of sports goods remained at very high level.
a. Find the equilibrium price and equilibrium quantity for the sports goods industry in Pakistan. Also show the equilibrium condition graphically.
