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Assignment on economics PDF

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Running head: ECONOMICS ASSIGNMENT MBA
Economics assignment MBA
Name of the student
Name of the University
Author Note
1ECONOMICS ASSIGNMENT MBA
Table of Contents
SECTION “A”...........................................................................................................................2
Answer 1:...................................................................................................................................2
Answer 2:.................................................................................................................................10
Answer 3:.................................................................................................................................12
Answer 4:.................................................................................................................................13
Answer 5:.................................................................................................................................15
SECTION “B”..........................................................................................................................17
Answer 1..................................................................................................................................17
Answer 2..................................................................................................................................22
References:...............................................................................................................................24
2ECONOMICS ASSIGNMENT MBA
S0
S1
D
Price of Newspaper
O
P0
P1
Amount of newspaperQ0Q1
SECTION “A”
Answer 1:
1.
a
This section describes newspaper market through providing two Case studies:
Case 1: “The salaries of journalists increase”:
Journalists are considered as an input for producing newspapers. Therefore, their
salary increment will force newspaper publishers to decrease the amount of quantity supplied
at any fixed price. According to basic concept of microeconomic, firms generally react due to
increase in wages. As a result, an increase in wage can force aggregate amount of supply to
reduce further at the existing price level (Friedman 2017). The following figure can represent
this situation accurately.
Source: (created by author)
Figure1: Decrease in supply of newspaper
3ECONOMICS ASSIGNMENT MBA
In above figure, D represents demand for newspaper in market. Initially, the market
supplied S0 amount of newspaper. However, after salary increment of journalists, publishers
reduce their publication and consequently the supply curve shifts towards left (Cowell 2018).
The new supply curve becomes S1. However, the demand for this product remains at its
initial position. Therefore, the equilibrium point shifts towards left. After this shifting,
equilibrium price increases from P0 to P1 while equilibrium amount of newspaper decreases
from Q0 to Q1. This implies that publishers will produce comparatively less amount of
newspaper and charge higher price than before.
Case 2: “There is a big news event in your town, which is reported in the newspapers”:
Citizens within this town want to purchase more newspapers after the big news event.
This further increases demand for this newspaper at the existing price. As a result, the total
demand for newspaper will increase and this further will lead the demand curve upwards
(Azevedo and Leshno 2016). However, at this situation, supply curve will remain unchanged.
This can be described with the help of following diagram.
4ECONOMICS ASSIGNMENT MBA
S0
D0
Price of Newspaper
O
P0
P1
Amount of newspaperQ1Q0
D1
Source: (created by author)
The above diagram represents the condition when total demand curve in newspaper
market increases from D0 to D1. However, the supply curve remains same at S. In this
condition, the market equilibrium shifts upwards and this further increases equilibrium price
and equilibrium quantity as well. In figure, this equilibrium price increases from P0 to P1
while equilibrium amount of newspaper increases from Q0 to Q1.
b. The following two cases will consider the market for St. Louis Rams cotton T-shirts:
Case 1: “The Rams win the Super Bowl competition”:
In this situation, fans will wish to have more memorabilia of St. Louis Rams at given
price. This indicates that the demand for cotton T-shirt of St. Louis Rams will increase
further while supply will not change during this situation (Chindarkar and Thampapillai
2018). This increase in demand can be represented with the help of following diagram.
Figure2: Increase in demand for newspaper
5ECONOMICS ASSIGNMENT MBA
S0
D0
Price of T-shirt
O
P0
P1
Amount of T-shirtQ1Q0
D1
Source: (created by author)
Figure 3 represents demand for and supply of St. Louis Rams cotton T-shirts. As the
demand for T-shirt increases, demand curve shifts upward from D0 to D1. On the contrary,
the supply of this product remains same and consequently supply curve does not change. In
this situation, equilibrium of this product shifts upward and this further leads equilibrium
price and equilibrium quantity to increase (Hildenbrand 2014). In figure, this equilibrium
price shifts from P0 to P1 while the equilibrium amount of T-shirt also increases from Q0 to
Q1.
Case 2: “The price of cotton increases”:
To produce T-shirt, cotton is used as an input. Thus, an increase in price of cotton
further increases the production cost of T-shirt. Therefore, manufacturers will further reduce
total production of this product and consequently total supply of T-shirt will decrease in
market at the existing price. On the contrary, demand for this item will not change (Rao
2016). Therefore, supply curve of T-shirt will shift towards left while demand for this product
Figure3Increase demand for T-shirt
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