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Assignment - Introduction To Microeconomics

This document outlines a group assignment for a Principles of Microeconomics course. It contains two questions - the first involves plotting supply and demand curves for bicycles and determining the equilibrium price and quantity, and the impact of changes in price. The second question involves calculating price elasticity of demand, and determining the impact of changes in income and technology on supply and demand. Students are instructed to submit both soft and hard copies of their group solution by a specified deadline.

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Felix blay
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104 views2 pages

Assignment - Introduction To Microeconomics

This document outlines a group assignment for a Principles of Microeconomics course. It contains two questions - the first involves plotting supply and demand curves for bicycles and determining the equilibrium price and quantity, and the impact of changes in price. The second question involves calculating price elasticity of demand, and determining the impact of changes in income and technology on supply and demand. Students are instructed to submit both soft and hard copies of their group solution by a specified deadline.

Uploaded by

Felix blay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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DEPARTMENT OF BANKING AND FINANCE

SCHOOL OF BUSINESS
Course: PRINCIPLES OF MICROECONOMICS Course code: BBA111N
GROUP ASSIGNMENT 2020/2021 ACADEMIC YEAR

INSTRUCTION: THIS IS A GROUP ASSIGNMENT. A GROUP SOLUTION SHOULD CONTAIN INDEX


NUMBERS OF ALL GROUP MEMBERS. BOTH HARD AND SOFT COPY SHOULD BE SUBMITTED. SOFT
COPIES SHOULD BE SUBMITTED VIA THE LMS LATEST BY NOON, TUESDAY THE 6TH OF APRIL 2021.
ALL HARD COPIES SHOULD BE SUBMITTED TO THE CLASS/GROUP REPS TO BE FORWARDED TO
THE COURSE LECTURER.

QUESTION ONE.

Suppose we have the following market supply and demand schedules for bicyles.

PRICE QUANTITY DEMANDED QUANTITY SUPPLIED


Ghc 100 70 30
200 60 40
300 50 50
400 40 60
500 30 70
600 20 80

a. Plot the supply curve and the demand curve for bicycles in for the above table.
b. What is the equilibrium of bicycles?
c. What is the equilibrium quantity of bicycles?
d. If the price of bicycles were Ghc100. is there a surplus or a shortage? How many units of
surplus or shortage are there? Will this cause the price to rise or fall?
e. If the price of bicycles were Ghc400, is there a surplus or a shortage? How many units of
surplus or shortage are there? Will this cause the price to rise or fall?

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f. Suppose that the bicycle maker's labour union bargains for an increase in its wages.
Furthermore, suppose this event raises the cost of production, makes bicycle
manufacturing less profitable, and reduces the quantity supplied of bicycles by 20 units
at each price of bicycles. Plot the new supply curve and the original supply and demand
curves. What is the new equilibrium price and quantity?

QUESTION TWO.

Suppose the Daily Graphic Newspaper estimates that if it raises the price of its newspaper from
Ghc1.00 to Ghc1.50 then the number of subscribers will fall from 50,000 to 40,000.

a. What is the price elasticity of demand for the Daily Newspaper when elasticity is
calculated using the midpoint method?
b. What is the advantage of using the midpoint method?
c. If the Daily Newspaper's only concern is to maximize total revenue, should it raise the
price of a newspaper from Ghc1.00 to Ghc1.50? Why or why not?
d. Suppose there is an increase in consumers' incomes. In the market for automobiles
(a normal good), does this event cause an increase in demand or an increase in quantity
demanded? Does this cause an increase in supply or an increase in quantity supplied?
(Explain. NB: Explanation must not be more than half a page.)
e. Suppose there is an advance in the technology employed to produce automobiles. In
the market for automobiles, does this event cause an increase in supply or an increase
in the quantity supplied? Does this cause an increase in demand or an increase in the
quantity demanded? Explain NB: Explanation must not be more than half a page.
f. The demand and supply functions for two related commodities A and B in two different
markets are defined below:
QdA= 410-5PA-2PB QdB= 295-PA-3PB
QsA= -60+3PA QsB= -120+2PB
i. Find the equilibrium conditions in the two markets
ii. How are goods A and B related? Explain your answer.

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