Microeconomics3 Part A: Micro- and Macro-economics

Business Economics

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
Part A: Microeconomics............................................................................................................3
Question One..........................................................................................................................3
Question Two.........................................................................................................................4
Question Three...........................................................................................................................5
Question Four.............................................................................................................................6
................................................................................................................................................6
Question Five.............................................................................................................................6
Part B: Macroeconomics............................................................................................................7
Question Six...............................................................................................................................7
Question Seven...........................................................................................................................8
Question Eight............................................................................................................................9
REFERENCES.........................................................................................................................11

INTRODUCTION
Economic have two main aspects which is micro-economics and macro-economics
which involves the various principles and concepts related to economics. In this report,
various aspects and topics of economics will be analysed and interpreted based upon the
situation given. It covers the topic like public policies on curbing monopoly, understanding
the point of equilibrium, income elasticity pertaining to demand. It also demonstrates the
labour supply in US and the factors causing a shift. In addition to this, it will demonstrate the
influence of increasing oil prices over the SRAS curve and the ways to control the money
supply in the economy. At last, it involves understanding the impact of interest rate over the
economy and the policies used by government to overcome the crisis.
Part A: Microeconomics
Question One
a.
Monopoly is problematic for country and government
It is a situation in the market where there is only one seller in respect to a particular product.
For instance, has been head of various monopolies like as of Saudi Aramco and many other.
It can be conveyed that where there is monopoly organization or the firms has the full
dominance over the market which involves their own terms and conditions (Christophers,
2018). This is possible because they are sole trader or provider of such product or services.
This results into aggressively influencing the prices of the goods which results into creating a
problem for government along with the economy at large.
b.
Public policy can curb monopoly
The government is having a full right to plan and implement policies in order to control the
market. The firms within the monopoly market requires to comply with government
regulation for delivering its functions (Schuetz, 2020). Support of government helps in
curbing the better environment for the other firms for entering into monopolistic market. For
instance, 1890 Sherman Antitrust Act can overcome the certain monopoly of few
monopolistic firms in the standard oil, steel and other similar sectors.
c.
Curve demonstrating how monopoly make unusual profits

The above chart clearly depicts that the monopoly makes unusual profits and gains through
the way of channelizing the business operations and functions. Since, such firm is the only
running entity within the market which makes it dominate the market in terms of prices
(Barney and Mackey, 2018). The yellow area highlighted conveys the supernormal profits
that the company undertakes. The Pe is the price the entity receives for each of the units sold
(AR) while Ce is the average cost of involved in making each unit. In the given case, AR<Ac
so the yellow part is the supernormal gain. this is considered as the sustainable long run
position for a monopoly.
Question Two
a. The equilibrium price is 80 cents a pack, and the equilibrium quantity is 130 million
pack a week. The price of a pack adjusts until the quantity demanded equals the
quantity supplied. At 80 cents a bag, the quantity demanded is 130 million packs a
week and the quantity supplied is 130 million packs a week.
b. At 50 cents a pack, there will be a shortage of sweet pack and the price will rise. At
50 cents a pack, the quantity demanded is 160 million packs a week and the quantity
supplied is 100 million packs a week. There is a shortage of 60 million bags a week.
The price will rise until market equilibrium is restored—80 cents a bag.