This document provides study material and solved assignments on the topic of Economics. It covers various concepts in microeconomics and macroeconomics, including production possibility frontier, demand and supply, price elasticity, and more.
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Running head: ECONOMICS Economics Name of the student Name of the university Author note
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3ECONOMICS 05,00010,00015,00020,00025,00030,00035,000 0 1000 2000 3000 4000 5000 6000 PPF CARS BICYCLES Figure1Production capacity of Newland Answer b) The production possibility frontier is a kind of curve that is used to depict all the maximum output possibilities of the two commodities. The production possibility frontier known to assume that all the inputs are used in an efficient way.The factors which will be affecting the production possibility frontier are labour, capital along with technology. PPF can also be termed as the transformation curve. The PPF is usually known to indicate the production possibilities of the commodities in this case the two commodities are the bicycles and cars. By drawing the diagram it can be said that production of cars can only be increased when the production of bicycles can be reduced. In this case the PPF is known to measure the efficiency where two of the commodities can be produced together. Therefore, it can be said that the production possibility curve will be used in measuring the efficiency where two of the goods can be produced. The assumptions which can be taken into accountwhilegraphing the production possibility curve the technology are
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4ECONOMICS known to be constant an resources are used efficiently and that there will be absence of a choice between the two commodities. It is also assumed that there will be technical efficiency of the resources, the economy has fixedresources and the technology is also fixed. The properties of PPF includes: 1.They are concave to the origin because of the increase in the opportunity cost. 2.Rise in the marginal rate of transformation. This happens because with the production of the additional number of goods, more and more units of the other goods are need to be sacrificed. 3.Downward sloping in nature as more amount of production of one good means decline in the production of the other good. 4.Utilisation of resources will be optimum in nature. The points which will be lying in the production possibility frontier will be associated with full employment of the resources along with efficient utilisation of the available technology. Answer c) Newland can increase the production of both bicycles and cars through advanced technology. Itcan only produce enough cars and bicycles when it will be having enough advanced technology or the country can trade for high amount of goods,.
5ECONOMICS ANSWER 2 PriceQuantityRevenue 2005010000 2504511250 3004012000 3503512250 4003012000 Answer a) When the price falls from $400 to $350 and then $350 to $300 a chip the total revenue will be increasing or decreasing according to the quantities sold in the market. As from the above table it can be seen that when the price of the chip is $400, the quantity sold in 40 unlike of $350 where the quantity sold in 35. So when the price of the chip decreases from $400 to $350 with the quantity of chips sold increasing the total revenue will also increase from $12000 to $12250. On the other hand when the price will be decreasing from $350 TO $300. The total revenue will be decreasing from $12250 to $12000. Answer b) Price Quantity demanded Total Revenue 2005010000 2504511250 3004012000 3503512250 4003012000
6ECONOMICS From the above table it can be said that the demand for chips is inelastic in nature. Also with the help oftotal revenue testit can be said that the demand in inelastic in nature since a rise in price lead to rise in the total revenue and when there is decrease in price it have less amount of total revenue. QD = 100-5P QS = 5P For equilibrium in the market the demand should be equal to the supply of the product. QD =QS 100-5P =5P 100=10P P=10 Answer c) Therefore putting the value of P in QD and QS, the equilibrium quantity will be 50 and the price will be 10. Answer d) As the intercept of the demand curve was found to be 20. Therefore calculating the consumer surplus will be CS= ½*(20-10)*50 =1/2*10*50 = 250 Therefore, it can be said that the value of the consumer surplus will be 250. The producer surplus will be calculated in the same way where PS=½*(20-10)*50
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7ECONOMICS =1/2*10*50 = 250 The producer surplus will be 250 +250 = 500 Answer e) Cosumersurplus=1 2×(20−15)×25 ¿1 2×5×25 ¿62.5 The producer surplus will be therefore 10*25+1/2*5*25 = 250+ 62.5 =312.5 Therefore, the deadweight loss will be = 2*1/2*5*25
8ECONOMICS =25*5 =125 The consumer surplus will be 250+62.5 = 312.5 The new producer surplus = 62.5 Deadweight loss =2*1/2*5*25 = 125 Answer f) Figure2New equilibrium
9ECONOMICS P Q S D D1 ANSWER 3 Answer a) Figure3Reduction of demand of DVDs From the above diagram it can be said that with the introduction of the online video rentals and streaming, the demand for the DVDs will therefore decline. When the streaming and the video rentals have increased, the demand for the DVDs will be going down as people will avoid going to stores and buy DVDs. Answer b) Optus online movie rentals here in this case are said to be more price elastic when compared demand for online movie rentals. The reason for this is that Optus will be having a competitive market compared to the general market online movie rentals. Price elasticity of
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10ECONOMICS demand is the measure used in economics for showing the responsiveness or elasticity of the quantity demanded of a good or service. Answer c) The cross price elasticity of goods is the responsiveness of the quantity demanded for the good to a change in the price of the good.As the online movie rentals and the in store movie rentals are substitutes it will be having a positive cross elasticity of demand. The reason for this is that with the increase online movie rentals and in store movie rentals will decline.
11ECONOMICS Reference list Bauer, M.J.R., 2018. Principles of microeconomics. Cowell, F., 2018.Microeconomics: principles and analysis. Oxford University Press. Cowen, T. and Tabarrok, A., 2015.Modern principles of microeconomics. Macmillan International Higher Education. Fine, B., 2016. Microeconomics.University of Chicago Press Economics Books. Friedman, L.S., 2017.The microeconomics of public policy analysis. Princeton University Press. Iossa, E. and Martimort, D., 2015. The simple microeconomics of public‐private partnerships. Journal of Public Economic Theory,17(1), pp.4-48. McKenzie, R.B. and Lee, D.R., 2016.Microeconomics for MBAs: The economic way of thinking for managers. Cambridge University Press. Microeconomics, E.E., 2015. KELVIN WONG.Cell,808, pp.386-8406. Tahir, S., Ghazali, A. and Agil, S.O.S. eds., 2017. Readings in Microeconomics: An Islamic Perspective.In The Name of Allah, The most Beneficent, The most Merciful, p.104.