Business Economics And Behavioral Models

Running Head: Business Economics 1
Business Economics
Student Name
3/19/2020

Running Head: Business Economics 2
Contents
Question 1...................................................................................................................................................3
Question 2...................................................................................................................................................3
Question 3...................................................................................................................................................3
Question 4...................................................................................................................................................4
Question 5...................................................................................................................................................5
Question 6...................................................................................................................................................5
Question 7...................................................................................................................................................7
Question 8...................................................................................................................................................8
Question 9...................................................................................................................................................8
Question 10.................................................................................................................................................9
Question 11.................................................................................................................................................9
Question 12...............................................................................................................................................10
Question 13...............................................................................................................................................10
Question 14...............................................................................................................................................11
Question 15...............................................................................................................................................11
References.................................................................................................................................................13

Running Head: Business Economics 3
Question 1
Total Cost = Actual Cost + Opportunity Cost
Therefore;
8000+4000+20000
=32000
As the research expense will also mean losing the 20,000-year salary, which Ted might normally
get.
Question 2
The automaker focused on what people were doing, instead of what they were doing. In
this case an economic model would have been attempted to determine whether the anticipated
benefits from driving safer vehicles would have been significant enough to justify the higher
price for consumers. Economic models are behavioral models and not models of how and what
people think, or how the opinions of people directly influence their behaviour. In addition, they
didn't take into account other variables (Ellis, Liu, & Christofides, 2016).
Question 3
As in order to analyze the trade policy of US and Canada, this argument is incorrect as
trade in goods and services depends on the infrastructure available in the respective countries.
The US has a trade deficit of goods as seen in the diagram, and a trade surplus with Canada for
service. It means that, relative to Canada, the United States has stronger infrastructure or more
varied infrastructure and a net export of services to Canada Conversely, Canada is a net exporter
of products to the United States, and the United States, on the other hand, is a trade deficit of
products, as seen in the figures below:

Running Head: Business Economics 4
In 2018, the US trade deficit with Canada in products was $19.1 billion. Trade in services
(exports and imports) with Canada totaled a record $99.9 billion in 2018. Exports of services
stood at $64.1 billion; imports of services stood at $35.9 billion. In 2018, the US services trade
surplus with Canada stood at $28.2 billion (Gholizadeh-Roshanagh, & Zare, 2019).
In 2018, Canada became the top manufacturing market for products in the United States.
In 2018, Canada became the third most significant source of supplies of products in the United
States.
Question 4
The statement is true entirely as this line raises output of the nation and most limitations are
implemented in the field of specialization and exchange. Since it's so:
 A nation specializing in a single commodity variety that allows products cheaper in this
area raises the purchase rate of this drug. It is a specific form of product that allows them
to raise their intake as it is affordable.
 Trade from various parts of the world often leads to expanded demand, as trade barriers
between countries have decreased slightly from their history.
 It implies that it is a limited resource available in the world because a specialized
commodity is accessible anywhere, then it can be utilized carefully rather than provide
more than needed, and therefore it is necessary in goods of this sort to raise tariffs and
their value in reaching annual demand rather than suppliers and that production,
decreasing resource availability.
 If a product is manufactured or more diverted to a certain location in the country, it is
time that government introduces additional duties or quotas, such that the demand is that.

Running Head: Business Economics 5
Therefore, this is the case, but, because it can become sparse in future, it is often more
important to enforce tariff quotas such that it is in line with anticipated demand instead of going
beyond supply which leads to higher usage. That is valid as it is specialized and exchanged
(Gutiérrez-Alcaraz, Tovar-Hernández, & Lu, 2016).
Question 5
It is probable that one nation will produce more units of output of both products for the
same capital, under the framework of a two-country model. The Total Benefit is named. In a
single hour, for example, America produces 10 good A units and 20 good B units, while Japan
will produce 5 good A units and 4 good B units. In both things, the US then has an absolute
benefit.
However, exchange is not based on the actual profit, but on the competitive advantage concept.
A nation has the competitive benefit of delivering this value at a lower cost of chance (OC). In
the case above,
OC of good A in USA = 20/10 = 2 units of B
OC of good A in Japan = 4/5 = 0.8 units of B
Since Japan can generate good A in a lower OC than the US can (0.8<2), the comparative
advantage of Japan in good A is comparable (and the US in good B has comparative
advantages). And it would help Japan and the United States because Japan is skilled in and
exports good A to the United States, and the United States specializes in good B and exports to
Japan (Hollensen, & Opresnik, 2019).
Question 6
 The equilibrium is determined when the demand and supply of goods are equal. If the
goods are oversupplied in the market then it will pull the price to downward direction that
directly increase the demand until the demand is equal to PE.

Running Head: Business Economics 6
 In the case if the current price is above the equilibrium price, then quantity supply be QB
as well as quantity demand be QA. There over flood of up to QA QB goods in the market.
 When the price of the product is below the equilibrium price from PE to P1 then the
market will undersupplied as the quantity demand will QB however, the company will
supply only QA. such shortage in market enhance the pressure of price to increase upward
direction to equalize the supply to the demand (Hollensen, & Opresnik, 2019).

Running Head: Business Economics 7
Question 7
The economy is in equilibrium where the demanded quantity matches the provided quantity.
In the following graph the first demand and supply curves are split into D0 and S0 at points A
and P0 and Q0 at the balance level (Keeton, 2017).
With rising labor costs, manufacturing is getting more expensive and therefore businesses
are reducing output. As a consequence, supply curves move from S0 to S1, D0 intersects at B at
higher levels, P1 and lower volume Q1. This results in lower output.

Running Head: Business Economics 8
Question 8
There is a surplus where the volume requested is smaller than the quantity given,
resulting in excess production in the industry. This makes the stock price a downward push.
There will be a surplus because the policy stipulates a contractual price limit over free market
clearance. Consumers may reduce their demand at higher rates but suppliers may increase the
output, resulting in the surplus (Mankiw, 2016).
Question 9
Canada is the primary source in the United States of raw oil products and over the span of
the last decade it has increased its yield dramatically. The main factor for this advancement is the
pursuit of oil sands savings, the exploitation of which allows for non-traditional ways of oils
mining that have proved financially acceptable as unrefined oil prices increase and the creativity
of production is advancing. The extension of the fats and the spot market may then have the
driving factors for vertical cooperation between upstream and downstream petroleum processing
and promotion stages of the petroleum industry.Furthermore, the expansion of opportunities and

Running Head: Business Economics 9
spot exchanges appears to have enabled a better distribution of value hazards between producers,
refiners and different dealers, and encouraged the buyers and sellers to enable potential value
terms to be established on a widely-perceived spot or prospects. After October 2006 this is the
largest month to month in the entire series.In June, fuel prices fell by 4.1per cent as a
consequence of the fundamental contributor to the CPI's growth between April and May. This
decrease can be largely attributed to fuel price declines. After October 2006, there had been no
decline in this grandeur. The decline in gas costs in June may be explained to some degree by the
rebound in small consumption rates in refineries following the conclusion of the repair firms
controlling supplies in May (Ponomarev, 2016).
The implacable rise in unrefined oil prices has had a major effect on the late volatility in
gas spending. In the most current year, unrefined oil prices have nearly risen by around 35
pennies per liter. Although the expense of non-refined petroleum relates to only a fraction of
retail oil prices, fuel costs, for instance, is the most critical factor behind the delayed pilot output
of petroleum products.
Question 10
This distinction is by nature incorrect. If its demand elasticity is less than 1, its price
elasticity is considered a requirement. Consider even a community with just one high end
automotive dealership, such as a Lamborghini store. Because there are no alternatives in town,

Running Head: Business Economics 10
the demand elasticity in Lamborghini is very weak, but this is not a requirement.Another
indication is a shift of customer desire or choice. Let us look at an illustration of women getting
high-ranking boots and a very low quality elasticity, thereby rendering buyers less prone to
market shifts. This is not a must for high-risk footwear (Tarasova, & Tarasov, (2017).
Question 11
The market elasticity is 0.8, smaller than 1. Demand elasticity below 1 (under 1) means
that the percent increase in the volume demanded is smaller than the percent shift in commodity /
service rates. In other terms, as demand elasticizes less than 1 the amount required is not
significantly influenced by market increases for the products / services. There is, however, no
reasonable concept in this issue of awarding 20% off purchases to customer while demand
becomes less elastic, i.e. (Demand elasticity < 1]) provided that the amount requested (product /
service demand) is not so much altered regardless of the increase in the quality of the product /
service (Tracy, 2017).
Question 12
1. Since it is less than 1, it means that the market is inelastic. This figure indicates that
crowds (people / customers) are fairly immune to demand shifts or do not react much;
this affects sales income, provided that crowds are not involved in looking at the game,
even if the price of the ticket has decreased. It will still go below, thus, not meeting the
projected earnings (Keeton, 2017).
2. 2. For organizers, it would have changed from less than 0.61 to show it is a right price
decision. If their previous predictions are less than 0.61 so organizers will conclude it's a
smart price choice as it's lowered to 0.61 (Ponomarev, 2016).
Question 13
1. It is the lowest commodity policy in the market floors will create, meaning that stocks can be
improved because as the product becomes cheaper, consumption of this product rises, even

Running Head: Business Economics 11
though there is a small requirement to do and, so it moves the point of balance upwards, i.e.
above the real point of balance (Marglin, 2017).
2. That is the maximum price imposed by regulators for the reduction of consumers ' usage in
this market, as costs for a commodity demand for that good fall because it therefore decreases
the output for suppliers, thereby lowering both supply and demand, taking the balance lower to
natural equilibrium.
Question 14
Some of the products tend to be eaten. Scarcity is found because these commodities are
short-suffering. The issue is increasing and increasing, with the supply demand deficit rising.
Rationalization of commodities is important in order to resolve this crisis. The availability of
commodities in specific industries is restricted in rationing. An allocation can be allocated by
management to a specific field. The social dimension should be closely remembered when
rationing the usage of precious resources.Maximizing healthcare is the basic goal of the state. So
how much value from each unit will be determined before settling on a rationed allocation. A
priority schedule of tasks would be planned on the basis of subjective satisfaction. The highest
level of products per device will be allocated to the business. The allocation will therefore be
rendered from the lowest priority region. It maximizes the surplus for customers and thus the
overall economic wellbeing (Keeton, 2017).
Question 15
A minimum wage is a demand limit that equals the free labor levels in the economy. For
marginal pay, the minimum wage is greater than the free market rate, since businesses reduce
their labor demand while employers raise the volume of labor supplied. In the job sector, an
abundance of jobs (abundance) is possible. In the following table, the curves of labor demand
and supply intersection at element E with labor equilibrium (e.g. pay rate) P0 and labor
quantities Q0 are shown. D0 and S0 (Mankiw, 2016).
With the introduction of market floors (PF), the amount of labor needed falls to Q4 and the
amount of manpower supplied increases to Q3 to build surpluses equivalent to (Q3-Q4).

Running Head: Business Economics 12
DEF region= DEF field

Running Head: Business Economics 13
References
Ellis, M., Liu, J., & Christofides, P. D. (2016). Economic model predictive control. Berlin,
Germany: Springer.
Gholizadeh-Roshanagh, R., & Zare, K. (2019). Electric power distribution system expansion
planning considering cost elasticity of demand. IET Generation, Transmission &
Distribution, 13(22), 5229-5236.
Gutiérrez-Alcaraz, G., Tovar-Hernández, J. H., & Lu, C. N. (2016). Effects of demand response
programs on distribution system operation. International Journal of Electrical Power &
Energy Systems, 74, 230-237.
Hollensen, S., & Opresnik, M. O. (2019). Fundamentals of Relationship Marketing. World
Scientific Book Chapters, 1-42.
Keeton, W. R. (2017). Equilibrium credit rationing. British: Routledge.
Mankiw, N. G. (2016). Business economics. United States: Cengage Learning.
Marglin, S. A. (2017). Wages, prices, and employment in a Keynesian long run. Review of
Keynesian Economics, 5(3), 360-425.
Ponomarev, Y. (2016). Pass-Through Effect: Rise in Prices in Q3 Will Slow Down. Russian
Economic Developments. Moscow, (8), 13-15.
Tarasova, V. V., & Tarasov, V. E. (2017). Logistic map with memory from economic
model. Chaos, Solitons & Fractals, 95, 84-91.
Tracy, J. D. (2017). WAGES AND PRICES. The World of Renaissance Italy: A Daily Life
Encyclopedia [2 volumes], 136.