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Assignment on Business Economics pdf

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Added on  2021-04-17

Assignment on Business Economics pdf

   Added on 2021-04-17

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Running head: BUSINESS ECONOMICSBusiness economicsName of the studentName of the universityAuthor Note
Assignment on Business Economics pdf_1
1BUSINESS ECONOMICSTable of ContentsAnswer 1:...................................................................................................................................2Answer 2:...................................................................................................................................5Answer 3:...................................................................................................................................7References:.................................................................................................................................9
Assignment on Business Economics pdf_2
2BUSINESS ECONOMICSAnswer 1: The market demand curve of the Nordic bridge consists with the individual demandcurve of the two countries, which are, Denmark and Sweden, who have constructed thisbridge jointly (Azevedo & Gottlieb, 2017). The demand side of this bridge is seen asperfectly competitive because of some characterizes that form this particular market structure.To travel between these two countries, a person can choose any one of the transportoption, viz., bridge, railway and ferry. Hence, from their operational perspective, eachmeans of transport is offering almost same service and hence they are close substitute.Number of passengers of both countries is large for using bridge.The two governments of Sweden and Denmark have made this bridge and can chargeprice for using this, respectively. Hence, for a particular product, the number ofproducers is more than one.Each traveler and supplier of this bridge has perfect knowledge about the market, thatis, what is the traveling cost for rail and ferry along with services, like time durationto travel from one part to another.The price, charged by the bridge, is determined by the supply and demand of thismedia of transport; hence, both travelers and builders are price taker.Thus, under this perfectly competitive market, individual demand curve of bridge for bothcountries along with rail and ferry has an infinite slope, which is represented by ahorizontally straight line, where the same line represents average revenue (AR) and marginalrevenue (MR) (Dueñas, Leung, Gil & Reneses, 2015). This is shown below.
Assignment on Business Economics pdf_3
3BUSINESS ECONOMICSAR= MR= DPriceOOutputPFig1: Individual demand curveSource: (created by author)In figure 1, the individual demand curve of bridge is drawn, which Sweden orDenmark is facing individually. As each country is enjoying a small share of the entiremarket demand, the travelling cost is determined through the market demand and marketsupply curve. Hence, the travelling cost of each country is P. However, the market demand curve of this bridge is downward slopping, whichindicates that, travelers can shift to rail or ferry, if this bridge has increased its cost oftransport, as the market has substitute products (Gerakos & Syverson, 2017). As bridge, railand ferry have possessed a small portion of the entire market, they cannot influence themarket demand curve or market price by changing its own price schedule.
Assignment on Business Economics pdf_4

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