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ECO Assignment #1

The document contains an individual assignment submitted by a student named Phạm Thị Thúy Lan. The assignment includes questions about microeconomics concepts like the circular flow diagram, production possibilities frontier, and supply and demand curves. It provides answers explaining households as sellers in factor markets, revenues for firms, drawing and labeling a PPF curve, and how shifts in supply and demand curves impact equilibrium price and quantity in markets for iPhones and tablet computers.

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Thúy Lan
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80 views5 pages

ECO Assignment #1

The document contains an individual assignment submitted by a student named Phạm Thị Thúy Lan. The assignment includes questions about microeconomics concepts like the circular flow diagram, production possibilities frontier, and supply and demand curves. It provides answers explaining households as sellers in factor markets, revenues for firms, drawing and labeling a PPF curve, and how shifts in supply and demand curves impact equilibrium price and quantity in markets for iPhones and tablet computers.

Uploaded by

Thúy Lan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Name : Phạm Thị Thúy Lan

Student ID: HS170832


ECON 111: MICROECONOMICS PRINCIPLES
INDIVIDUAL ASSIGNMENT
Question 1:
a. In the markets for factors of production in the circular flow
diagram, households act as a buyer or a seller?
b. In the circular flow diagram, what do firms receive selling goods
and services to households through markets for goods and
services.
Answers:
a. In the markets for factors of production in the circular flow
diagram, households act as a seller.
b. Firms receive revenues from the sale of goods and services after
selling goods and services to households through markets for goods
and services.
Question 2: Draw a production possibilities frontier showing
increasing opportunity cost of wine in terms of cloth.
a. On the graph, identify the area of feasible outcomes and the area
of infeasible outcomes.
b. On the graph, label a point that is efficient and a point that is
inefficient.
c. On the graph, illustrate the effect of the decreasing population
which leads to a decrease in the labor hours, a resource needed to
make both wine and cloth, on this economy.
d. On a second graph, illustrate the effect of a new computerized
assembly line in the production of wine on this economy.
Answers:
a. and b.
- Feasible outcomes: The left of the PPF
- Infeasible outcomes: The right of the PPF
- Point A: Not possible
- Point B: Possible but inefficient
- Point C: Possible and efficient
c. As the population decreases, there is a shortage of workers for
production, so the PPF curve will move to the left, due to a decrease in the
number of workers, the number of hours worked will also decrease, so the
quantity of wine and clothing will decrease. (The blue line is new PPF).

Win
e

3 C
0
20
0
0
10
0 B

0
1 2 3 4 5 6
Clo
0 0 0 0 0 0
th
0 0 0 0 0 0
d. When a new computerized assembly line is applied to the production of
wine, the number of workers will be replaced by the number of machines.
Due to advanced technology, the production machinery is efficient,
leading to an increase in the amount of wine produced.

Win
e

30
0
20
0
10
0

0
10 20 30 40 50 60
Clot
0 0 0 0 0 0
h
Question 3:
a. In this market for iPhones, the cost of components used to make
iPhones increase while all other factors remain constant. Which
curve(s) shift(s) and in which direction?
Explain the change(s) in the equilibrium price and quantity
b. In this market for tablet computers, more suppliers enter the
market and the price of laptops, a substitute good, increases, while
all other factors remain constant. Which curve(s) shift(s) and in
which direction?
Explain the change(s) in the equilibrium price and quantity.
Answers:
P
a. The cost of components increases →
r S
E S inputs price increases → supply decreases
i ------------
-----
-----
-----
-----
-----
-----

1 E
c 1
--

→ shift S curve to the left. The


e D
Q equilibrium price increases and the
u quantity supplied decreases.
a
nt
it
y
b.
P - More supplier → supply increases → shift
ri E S
c S
1 S curves to the right.
1
e E - Substitute goods (laptops) the price
increases → demand of tablet computers
D D increase → shift D curve to the right.
1 Q
ua - The equilibrium price increases and the quantity
nti changes (depends on the amount of increase
ty more or less).

● Notes:
+ E: The equilibrium point
+ D: The demand curve
+ S; The supply curve
+ E1: The new equilibrium point
+ D1: The new demand curve
+ S1: The new supply curve
+ P: The equilibrium price
+ Q: The equilibrium quantity
+ P1: The new equilibrium price
+ Q1: The new equilibrium quantity
P D
ri ● The situation: the quantity demanded is less
c S than the quantity supplied.
e E S
P ---------- E 1 The equilibrium price is down, and the quantity
------
--------
--------

P------------------ rises.
--------
--------

------ 1
1 ------------- D
Q Q 1 Q
1 ua
nti
ty
P
ri
SS
cP--------------------
---------
---------
---------

E1
--------
--------
--------

eP E
-------------
------

1 -------------------
1
---

---
D D
Q Q 1Q
nti
ty

● The situation: The quantity supplied is less than the quantity


demanded.
The equilibrium price rises and the quantity rises.

P
S
r D
i S
c 1 ● The situation: The quantity demanded is
E E
Pe ------------------ 1 equal to the quantity supplied.
--------
--------------
--------
--------------

------------------ The equilibrium price is unchanged and the


≡ ------------ D
Q Q Q 1 quantity rises.
P
1 1 ua
nt
ity

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