Opportunity Cost, Demand and Supply Analysis, Price Control and Elasticity of Demand

Economics 1
BE01105
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Economics 2
Question 1
The cost related to the next best alternative. This means that the opportunity cost of
undertaking something is the activity that would have been done in place of the
present activity. Today I happened to go for cinema, I took two hours in the cinema
hall and these two hours can be utilized in another task, I could read for two hours.
Therefore, the opportunity cost of attending the cinema is reading books for me. In
case of a good that is normal if there is an increase in income then demand for the
product will rise.
Question 2
a). The cost of beef intensifies while the purchases of beef increases. There are several
options. When the cost of beef elevates the income of money continues to be the
same. The purchasing capability of individuals reduces. Therefore, in case there
occurs any exchanges of beef then people will move to the new replacement. This
cannot take place if there is no adjacent replacement of beef, or if any replacement
exists, the cost of that replacement is very elevated that consumers cannot meet the
expense of the product (Espey, M., Espey, J. and Shaw, W.D., 2017, pp60).
Therefore, with an intensification in cost of beef, individuals will purchase greater
amounts of beef since the other meat is above their budget. In case of a good that is
normal if there is an increase in income then demand for the product will rise. In this
case, beef is a good that is normal; therefore, an acute increase in average income
elevates the beef demand. Due to elevating demand, the schedule for demand moves
from D to D1. As demand goes up, price increases from p to p1and quantity also rises
from Q to Q

Economics 3
b). As cattle takes little time to be ready for market, supply of the cattle rises but
demand continues to be the same, however, supply of beef rises. The diagram below
depicts this
As price level decreases from p to p1, supply increases.
c). Since government directed the bulk slaughter of cows together with warning
consumers concerning the risks of consuming beef, demand goes down. This
indicated by the following diagram (Hanushek, E.A. and Quigley, J.M., 2010,pp 23).
When demand reduces, price also price also falls and as price falls, there is a decrease
in quantity supply. Concerning the figure above price goes down from p to p1 and
quantity goes down from Q to Q1.
D1
P1
P2
S
Quantity of BeefQ1Q2
D2
D
P1
P2
S2
Quantity of CattleQ1Q2
S1