Microeconomic Analysis Assignment

This assignment covers key concepts in microeconomics, including supply and demand, elasticity, international trade, and market structures. Students analyze scenarios, apply economic models to real-world situations, and demonstrate their understanding of microeconomic principles through calculations and graphical representations.

Running head: ECONOMIC ASSIGNMENT
Economic Assignment
Name of the Student
Name of the University
Author note

1ECONOMIC ASSIGNMENT
Table of Contents
Part 1..........................................................................................................................................3
Answer 1................................................................................................................................3
Answer 2................................................................................................................................4
Answer 3................................................................................................................................5
Answer 4................................................................................................................................5
Answer 5................................................................................................................................7
Part 2..........................................................................................................................................7
Answer 1................................................................................................................................7
Answer 2................................................................................................................................7
Answer 3................................................................................................................................8
Part 3..........................................................................................................................................9
Answer 1................................................................................................................................9
Answer 2..............................................................................................................................11
Answer 3..............................................................................................................................12
Answer 4..............................................................................................................................13
Answer 5..............................................................................................................................13
Answer 6..............................................................................................................................15
Bibliography.............................................................................................................................16

2ECONOMIC ASSIGNMENT

3ECONOMIC ASSIGNMENT
Part 1
Answer 1
Figure 1: equilibrium in the labour market
D=60,000−5,000 w
S=5,000 w−35,000
At equilibrium, D=S
60,000−5,000 w=5,000 w−35,000
¿ , 10,000 w=95,000

4ECONOMIC ASSIGNMENT
¿ , w= 95,000
10,000
¿ , w=9.5
D=60,000−5,000 w
¿ 60,000− ( 5,000∗9.5 )
¿ 12500
Equilibrium wage = 9.5, the quantity of labours employed is 12500
Answer 2
a)D = 60,000- 5000w
The maximum wage that firm willing to pay is, 60,000
5,000 =12
Firms surplus= 1
2∗( 12−9.5 )∗12500
¿ 15625
b) S = 5,000w – 35,000
The minimum wage that the labours demand 35,000
5,000 =7
Workers surplus=1
2∗ ( 9.5−7 )∗12500
¿ 15625
c) Total surplus=firm surplus+worker surplus
¿ 15625+15625

5ECONOMIC ASSIGNMENT
¿ 31250
Answer 3
a)
Figure 2: Minimum wage and its impact
b)
c)At an minimum wage of $11.00,
labour demand isD=60,000− ( 5000∗11 )=5000. Corresponding to this labour supply is
S= ( 5,000∗11 ) −35000=20,000. Therefore, there will be excess supply of labour of the
amount ( 20,000−5000 )=15000
Answer 4
a)At the minimum wage of $11.00,

6ECONOMIC ASSIGNMENT
Consumer/firm surplus = Area of the triangle A = 1
2∗( 12−11 )∗5,000=2500
b) producer/worker surplus = area of (B+C)
B= ( 1.5∗5000 )=7500
C+ E= 1
2∗( 9.5−7 )∗12500
¿ 1
2∗1.5∗12500=9375
E=1
2∗ (12500−5000 )∗1.5
¿ 1
2∗7500∗1.5=5625
Producer∨firms surplus=7500+ 3750=11250
c)Total Surplus=2500+ 11250=13750
d)Resources lost in job search
( 15000∗1.5 ) − 2∗1
2 ∗1.5∗7500=22500−11250=11250
e)Deadweight loss=D+ E
D= 1
2∗( 11−9.5 )∗ (12500−5000 )
¿ 1
2∗1.5∗7500=5625
Deadweight loss=5625+5625=11250

7ECONOMIC ASSIGNMENT
Answer 5
If there are no resource costs, then wage has to be brought to the equilibrium level.
Then consumer surplus is 15625 and producer surplus is 15625. The total surplus is 31250.
With no resource cost for unemployment, there will be no distortion or deadweight loss.
Part 2
Answer 1
Figure 3 : Market for calculators
Answer 2
Income elasticity of demand= percentage chnage ∈demand
percentage change∈income

8ECONOMIC ASSIGNMENT
¿
∆Q
∆ Y ∗Y
Q
Under midpoint method,
Y = y1 + y2
2
¿ 800+900
2 = 1700
2 =850
Q= Q1 +Q2
2
¿ 10000+12000
2 =22000
2 =11000
Therefore,
Income elasticity=
( 900−800 )
( 12000−10000 ) ∗850
11000
¿
100
2000∗850
11000 =0.003864 0.004
Income elasticity is very low. This means there is very small percentage change in demand
when income changes.
Answer 3
Price elasticity of supply= Percentage chnage∈ Supply
Percentage change∈Price
¿
∆Q
∆ P∗P
Q

9ECONOMIC ASSIGNMENT
Under midpoint method,
P= p1 + p2
2
¿ 20+24
2
¿ 44
2 =22
Q= Q1 +Q2
2
¿ 10000+ 11000
2
¿ 21000
2 =10500
Therefore,
Price elasticity of supply=
(11000−10000)
(24−20) ∗22
10500
¿
1000
4 ∗22
10500 =0.52381 0.52
The price elasticity of demand for calculator is 0.52. This implies demand is relatively
inelastic that is when price of calculator changes then demand changes in relatively less
proportion than price.

10ECONOMIC ASSIGNMENT
Part 3
Answer 1
Demand equation,
P=100−5 Q
Supply Equation,
P=20+5Q
Figure 4: Market for figs and equilibrium
At equilibrium,
Demand=Supply
100−5Q=20+5 Q

11ECONOMIC ASSIGNMENT
¿ , 10 Q=80
¿ , Q=8
P=100−5 Q
¿ 100− (5∗8 )=100−40=60
Equilibrium price = 60 and equilibrium quantity = 8.
Answer 2
a)Demand equation,
P=100−5 Q
Maximum price that consumer willing to pay is 100
Consumer surplus= 1
2∗( 100−60 )∗8
¿ 1
2∗40∗8=160
b) Supply Equation,
P=20+5Q
Minimum supply price is 20
Producer surplus= 1
2∗( 60−20 )∗8
¿ 1
2∗40∗8=160
c)Total Surplus=Consumer surplus+ Producer surplus

12ECONOMIC ASSIGNMENT
¿ 160+160=320
Answer 3
Figure 5 : effect of international trade
At the world price of $ 40, domestic demand is,
D= 100−P
5
¿ 100−40
5 =60
5 =12
Domestic supply at this price,
S= P−20
5

13ECONOMIC ASSIGNMENT
¿ 40−20
5 =20
5 =4
The excess of the domestic demand will be imported .
Import=12−4=8 kg
Answer 4
a)
Consumer surplus= 1
2∗( 100−40 ) ∗12
¿ 1
2∗60∗12=360
b)
Producer surplus= 1
2∗( 40−20 )∗4
¿ 1
2∗20∗4=40
c)
Total Surplus= (360+ 40 ) =400
c) From the computed surpluses, it is clear that total surplus, which is a measure of welfare
increases after opening of international trade. This implies society is better off.
Answer 5

14ECONOMIC ASSIGNMENT
Figure 6: Effect of tariff imposition
Government imposes a tariff of $10. Because of tariff price in the domestic market
become $50.
At this price,
Domestic demand= 100−P
5
¿ 100−50
5
¿ 50
5 =10
Domestic supply= P−20
5

15ECONOMIC ASSIGNMENT
¿ 50−20
5
¿ 30
5 =6
Import =Domestic demand−Domestic supply
¿ 10−6=4 kg
Answer 6
a)
Consumer surplus= 1
2∗( 100−50 )∗10
¿ 1
2∗50∗10
¿ 250
b)
Producer Surplus= 1
2∗( 50−20 )∗6
¿ 1
2∗30∗6
¿ 90
c)
Total Surplus=250+ 90=340
d) Firms are better off as producer surplus increases.

16ECONOMIC ASSIGNMENT
Bibliography
Currie, D., Peel, D., & Peters, W. (Eds.). (2016). Microeconomic Analysis (Routledge
Revivals): Essays in Microeconomics and Economic Development. Routledge.
Wang, S. (2016). Microeconomic Theory (Book). Browser Download This Paper.