Assignment on Diploma in Management
Added on - 29 Apr 2020
Running head: DIPLOMA IN MANAGMENETBUSINESS MANAGMENETName of Student:Name of University:Author Note:
1DIPLOMA IN MANAGMENETAOBCDFGSDDWLHExcess SupplyISET-1Answer 5:From the given market data regarding the demand and supply schedule of the 100 gm coffee onecan say that at price $6 the quantity demanded and supplied is equal to 81 unit. If we look at thedata closely we will find that for one unit change in price that is price being $6 to $7 make sthedemand 68 unit and supply 98 unit. This explains that demand falls by 13 unit and supply risesby 17 unit. Now the market set price has been mentioned to rise and reach $6.25. This has led tofall in consumer surplus and producer surplus. Burden on consumers are more than producers.(Source: Author)
2DIPLOMA IN MANAGMENETInitially the price was $6 at B and now the price increased to $6.25 reflected by D which acts likeprice floor prevailing above the market equilibrium price. The initial consumer surplus wasreflected by the are AOB and producer surplus was the area BOC Now the consumer surplus hasreduced to area AFD and producer surplus has increased to CHFD where DFIB area is gained bythe producers due to rise in price. Clearly the area FOH is loss of total surplus as part of bothconsumer and producer surplus leaks out of the total surplus which was area AOC initially andnow has become The area AFHC.SET-3:Answer1:Purchasing Power Parity (PPP) is a standardized metrics devised to analyze the difference of theeconomic conditions and consequent difference in standard of living and economic parametersbetween countries of the world across time series. The theory of PPP explains the comparison ofcurrencies in different countries through an approach based on common basket of goods. Thetheory suggests exchange rate between two nations is equivalent to the ratio of the purchasingpower of the respective currencies. Differences in prices prevailing in the markets of differentnations stem from varied inflation rate in national economy and presence of trade and transactioncost. Moreover exchange rates are different. The Purchasing Power Parity focuses on the conceptthat builds law of one price. This further explains that when there is no presence transaction costand trade barriers goods of same type will be sold in same price in different countries’ marketsgiven that the prices are converted and expressed in same currency.