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Unit Code ECO504 Business Economics Assessment

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Charles Darwin University

   

ECO504 Business Economics (ECO504)

   

Added on  2019-11-08

Unit Code ECO504 Business Economics Assessment

   

Charles Darwin University

   

ECO504 Business Economics (ECO504)

   Added on 2019-11-08

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Student name:Unit Code: ECO504 Unit Title: Business Economics Assessment Title: Assessment Task 3 Type of Assessment: Written Due date: 13TH Sep
Unit Code ECO504 Business Economics Assessment_1
Q1. a.SHIFTS ALONG THE DEMAND CURVE: this is caused by changes in price ofa good. It is shown as a shift from one point on the demand curve to another point. Assume that price falls, so that we move from A to B, which is also called an increasein quantity of X demanded. A rise in price causes an opposite movement from C to D,or a decrease in quantity demanded. SHIFTS OF DEMAND CURVE: These are caused by all factors that affect demand except own price of the good. For example if income of a consumer rises, then she will demand more X with no change in price. This is shown by a right shift OF the demand curve, and we move from A to B. the difference is that A and B lie on different demand curves. The change in demand is called expansion of demand. A similar shift to the left can happen due to income fall. The movement from C to D is a contraction in demand.
Unit Code ECO504 Business Economics Assessment_2
b.The Middle East is a source of petrol needed for running cars. Any hostility is equivalent to disruption in supplies. This will lead to a rise in price of petrol, which is needed to run cars. Petrol and cars are complementary goods. As petrol gets expensive the demand for cars will decrease. This is shown in the figure as downshift of demand curve from D1 to D2. The result is a fall in quantity and price of such cars that use petrol as a fuel. c.
Unit Code ECO504 Business Economics Assessment_3
A battery car will not use petrol, and is a substitute for petrol based cars. As the price of petrol cars falls the demand for battery cars will also fall. This is shown as downwards shift of demand curve. The price and quantity of battery cars are both lower now. Q2. a. A unit sales tax is a tax applied per unit. It affects the variable cost of the good b. The relation is based on the incidence of tax, in terms of who bears the final cost of tax between seller and buyer. Higher is price elasticity of demand lower is the tax incidence on the buyer/consumer. So any tax imposition must be careful in terms of the final bearer of the tax. c. We expect price to rise and quantity to fall. A tax is shown as a left shift of the supplycurve to (S with tax). The extent of changes in quantity depend on demand elasticity. Higher is elasticity greater is fall in quantity (blue arrow), lower elasticity leads to lesser change in quantity.( red arrow) the price change is same = tax in both cases.
Unit Code ECO504 Business Economics Assessment_4

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