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ECON111 - Individual Assignment 02

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14 views9 pages

ECON111 - Individual Assignment 02

Uploaded by

mihyhs180769
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ECO111 Microeconomics

Class: MKT1926
Handed out:
Submission due:
Format:
Submission mode:
Email to:

STUDENT INFORMATION
Name: HOÀNG YẾN MI Roll number: HS180769
Room No: Class: MKT1926

FOR TEACHER ONLY


MARK MARKED BY
(NAME AND SIGNATURE)

Individual Assignment 02

Question 1. (2 points)

1. You can allocate your time for the next four years between studying and working at a car
wash. Each semester you spend studying you can earn 15 credit hours and each semester you
work at the car wash you wash 800 cars. If you have 8 semesters to allocate, label each of the
following on a graph.
a. Your production possibilities curve (0.5)
b. A point that is unattainable (0.5)
Point B
c. A point that is efficient (0.5)
Point A
d. Plot and label a point on your graph that represents a decision to take a semester off from
both studying and working. (0.5)
Point C

2. Refer to the graph provided to answer the following questions. (2 points)


Price
Supply

3
Demand

0
100 175 220 Quantity demanded
a. What are the equilibrium price and quantity in this market? (0.5)
The equilibrium price = 5
The equilibrium quantity = 175
b. What is the effect of a price ceiling of $3 placed on this market? (0.5)
S =100
D = 220
=> shortage of 120 products
c. What is the effect of a price ceiling of $7 placed on this market? (0.5)
It will have no effect since equilibrium price ( 5$ ) is below the ceiling of $7 .
d. If price in this market is $7, explain the adjustment process that will bring the market
back to equilibrium. (0.5)
The adjustment process will bring the market back to equilibrium : Supply shift
left

3. Graph the effect on equilibrium price and quantity in the market for oranges for each
of the following changes (graph each one separately). (2 points)
a. A chemical routinely sprayed on orange orchards is found to cause cancer.(0.5)

The demand for oranges falls


=> The D curve shifts left.The shift causes a decrease in equilibrium price and
quantity

b. The wages of farm workers increase. (0.5)


=> S curve shifts left.
The shift causes price to increase and quantity to fall

c. A new orange picking machine is invented. For the same cost, it can pick more
oranges, faster, and with less damage than other machines. (0.5)

=> The firms will supply more oranges


=> The S curve shifts rightThe shift causes price to fall and quantity to increase

D. Consumer income falls. (0.25)=>


base on how good the oranges are
Case 1: normal good
=> The demand for oranges falls => The D curve shifts left
The shift causes a decrease in price and quantity
Case 2: inferior good
=> The demand for oranges increases
=> D curve shifts right
The shift causes an increase in price and quantit

e. The price of tangerines falls. (0.25)


=> The demand for oranges falls => The D curve shifts left.The shift causes a decrease
in price and quantity
Question 2 (2 points)
1. You operate your own business selling college t-shirts. The demand schedule for
your t-shirts is as follows: P = 25 - 0.5Q.
a. Graph the demand curve for your t-shirts. (0.5)

P=25-0.5.Q => P=10 => Q=30


P=25-0.5.Q => P=15 => Q=20
P=25-0.5.Q => P=20 => Q=10

b. Calculate the price elasticity of demand when price equals $10. (0.5)
E = P/Q *1/0,5 = 10/30*1/0,5 = 0,67

c. In what range does price elasticity of demand fall at $10 (elastic, unit elastic,
inelastic)? (0.5)
- Price elasticity of demand fall at $10 in inelastic demand curve (E<1)

d. If your goal is to maximize total revenue, how should you change price if you are
currently charging $10? (0.5)
- TR= P x Q . If you are curently charging $10, to maximize total revenue , you
have to raise your ( between $10 and $20 )

2a.Use the information in the graph below to find price elasticity of supply at point A.
(0.25)

Price Supply

4 A

0 20 30 Quantity Demanded
- Suppose the supply schedule is as follows: P = a + b.Q
- When P = 4, Q = 20 => 4 = a + 20b a = -2
- When P = 7, Q = 30 => 7 = a + 30b b = 0.3
=> The supply curve is as follow: P = 0.3Q – 2
The supply elasticity at point A equals:
ES = 4/20 x 1/0.3 = 2/3 = 0.67

2b. Based on the elasticity of supply in part a, if price increases by 10%, by how much
will quantity supplied change? (0.25)
If the price increases 10%,
Es= % change in Qs / % change in P = 2/3
=> % change in QS = 2/3 x % change in P = 2/3 x 10% = 6.67%
=> The supply quantity will increase 6.67%

2c. What will happen to the price elasticity of supply, in each of the following cases
(becomes more inelastic, more elastic, or does not change)? (0.5)
i. inputs become easier to transport
the S curve is more elastic
ii. new inputs into production of the good are found
the S curve is more elastic
iii. the firm moves from the short-run to the long-run
the S curve is more elastic

Question 3. Which of the following is true for a vertical supply curve? (1point)
a. Price elasticity of supply is perfect elastic
b. Quantity supplied is very responsive to price changes
c. Price elasticity of supply is inelastic
d. Price elasticity of supply is infinite
e. Quantity supplied is negatively related to price

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