This document contains a tutorial on basic economics, accounting, and management. It covers topics such as distinguishing between microeconomics and macroeconomics, positive and normative economic analysis, production possibility frontiers, economic growth, changes in supply and demand, price controls, price elasticity, and cross-price elasticity. The tutorial poses questions to test understanding and provides diagrams and graphs to illustrate economic concepts.
This document contains a tutorial on basic economics, accounting, and management. It covers topics such as distinguishing between microeconomics and macroeconomics, positive and normative economic analysis, production possibility frontiers, economic growth, changes in supply and demand, price controls, price elasticity, and cross-price elasticity. The tutorial poses questions to test understanding and provides diagrams and graphs to illustrate economic concepts.
This document contains a tutorial on basic economics, accounting, and management. It covers topics such as distinguishing between microeconomics and macroeconomics, positive and normative economic analysis, production possibility frontiers, economic growth, changes in supply and demand, price controls, price elasticity, and cross-price elasticity. The tutorial poses questions to test understanding and provides diagrams and graphs to illustrate economic concepts.
This document contains a tutorial on basic economics, accounting, and management. It covers topics such as distinguishing between microeconomics and macroeconomics, positive and normative economic analysis, production possibility frontiers, economic growth, changes in supply and demand, price controls, price elasticity, and cross-price elasticity. The tutorial poses questions to test understanding and provides diagrams and graphs to illustrate economic concepts.
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Jan 2018
UKMM1043 Basic Economics, Accounting and Management
(Economics) Tutorial 8 1. For each of the following, list whether the topic is under microeconomics or macroeconomics in nature: (a.) The price of milk. (b.)The national inflation rate. (c.) The quantity of new cars sold each year. (d.)The wage rate paid to manufacturing workers. (e.) The amount of national output in an economy.
2. For each of the following, note whether the statement is an example of positive economic analysis or an example of normative economic analysis: (a.) An increase in the minimum wage will lead to a higher rate of teenage unemployment. (b.) If the government reduces the tax on tobacco, more individuals will start smoking. (c.) The government should lower taxes because tax rates are too high for the average U.S. family. (d.) Wealthy senior citizens can afford to buy their own health insurance and therefore should not be given Medicare coverage. (e.) If the price of tea increases, people will consume more coffee.
3. Draw a production possibility frontier. Find a point that represents a combination of
outputs that is not currently feasible. Label it point A. Find a point that represents efficient production. Label it point B. Find a point that represents inefficient production. Label it point C.
4. The table below represents five points on the production possibility frontier for the country of Aruba, which produces only paper (measured in thousands) and wheat (measured in thousands of bushels): A B C D E Paper 50 45 35 20 0 Wheat 0 10 20 30 40 If the economy is currently at point A, what is the opportunity cost of producing an additional 10,000 bushels of wheat? If the economy is currently at point B, what is the opportunity cost of producing an additional 10,000 bushels of wheat? What if the economy is currently at point D? Jan 2018
5. Using an appropriate diagram, show how economic growth affects the production possibility frontier.
6. Suppose a country produces two goods: corn and cars. New technology is developed that increases the amount of corn that can be produced. Use a diagram to show the effect on the country’s production possibility frontier. Explain what occurs in the diagram.
Tutorial 9 1. Using appropriate diagrams, explain the difference between a change in demand and a change in quantity demanded.
2. The following are some changes that may take place in the market for textbooks. For each of the following, explain what will happen to the DD and/or the SS of textbooks. a) An increase in student enrollment at universities across the country. b) A decrease in the price of ink used to print textbooks. c) A drop in income d) An improvement in the technology used to print textbooks. e) An increase in college tuition fees.
3. Explain how price adjusts to eliminate excess demand.
4. The table below shows the supply and demand for eraser: Price (RM) 0.6 0.5 0.4 0.3 0.2 Qd 100 120 140 160 180 Qs 150 120 90 60 30 a) What is the equilibrium price and quantity? b) Suppose the current price is RM0.30. Describe the present situation. Will the price remain at RM0.30? Explain.
5. Answer the following questions based on the supply and demand equations as Qs = -500 + 300P and Qd = 2000 - 100P. a) In a free market, what would be the equilibrium price and quantity? b) At the price of $3, what would happen? (Discuss in terms of adjustment to equilibrium). c) At the price of $7, what would happen? (Discuss in terms of adjustment to equilibrium). Jan 2018
6. The figure below shows the market for cotton fabric.
Will there be market equilibrium at the price of $8, $5 and $3 respectively?
Tutorial 10
1. Suppose the market for sugar is at equilibrium with price of $3 per kg and quantity of 2 million per month. Illustrate using an appropriate diagram of what will happen in the market when the government imposes a price floor of $4.50.
2. Explain with graph how each of the following events would affect the price and quantity of bread bought and sold. a) An increase in the price of flour b) An increase in consumer income c) Medical report showing that bread is rich in fiber
3. Using demand and supply analysis to illustrate how each of the following events would affect the price and quantity of butter bought and sold. a) An increase in the price of margarine b) An increase in the price of milk c) A decrease in the average income level
4. The quantities demanded (per year) at various prices for T-shirt are given as follows: Jan 2018
(a) Calculate the price elasticity of demand when the price increases from $118 to $133. (Use formula method)
(b) What will be the effect on total revenue if the seller raises the price for T-shirt?
5. Name three determinants of elasticity. Explain how each one affects the responsiveness of demand.
6. Based on the table, answer the questions.
Types of fruits Price elasticity of Income elasticity of Cross-price elasticity DD DD with apple Strawberry -0.6 1.5 1.8 Papaya -3.0 -2.1 -1.5 Kiwi -1.0 3.5 2.5 i) Is papaya an inferior product or normal product for Peter? Explain your answer. ii) What is the relationship between papaya and apple for Peter? Explain your answer. iii) If Peter’s income increased by 20%, how much is the changes of her demand for kiwi?
7. The cross-price elasticity between X and Y is positive. Illustrate on two graphs, one for good X and one for good Y, what will happen if the supply of X decreases.
8. Suppose the equilibrium rent for a two-room apartment in Kampar is RM350 per month. The city council decides to place a price ceiling on apartments’ rental and will not allow landlords to charge more than RM200 per month for each room. Draw this situation using a graph. What will happen in this market? Is it a good policy? Explain.
