Microeconomics Study Material

Running head: ECONOMICS
Economics
Name of the university
Name of the author
Author note

ECONOMICS
Answer 1
Answer a and answer b
The orange point shows the new production combination.
0 200 400 600 800 1000 1200 1400 1600
0
200
400
600
800
1000
1200
PPF
Semillon
Semillon Chrdonnay
Answer c
The drought will be shifting the PPF inwards since economy have decreased the capacity to
produce. Therefore, when output decreases due to drought, the ppf shifts left or inwards.

D
D1
D
P
S1
S2
ECONOMICS
Answer d
When the industry grape yields decrease, the supply of semolina wine also decreases. The
grape yields decreases and then Semillion wine also decrease.
With the increase in the income tax rates of the consumers, people will be consuming less
amount of wine as due to the rise in tax people will be demanding less amount of wine and
therefore, the demand curve moves to left. Increase in tax will therefore reduce the demand
for wine.
Increase in the price of beer will also lead to decrease in the demand for beer. As the price of
beer increases, people will be demanding less amount of beer.
Answer 2
Answer a
Pric
e
Quantit
y of
tickets
Elasticity

ECONOMICS
sold per
day
0 1200 --
20 1050 0
40 900 -0.14285714
60 750 -0.33333333
80 600 -0.6
100 450 -1
120 300 -1.66666667
140 150 -3
160 0 Infinity
Answer b
Since, the elasticity is less than one, therefore it can be said that the theme park can charge ay
price it wants. The inelastic price demand states that the quantity demanded will not be
changing a lot and the demand will not change whatever be the price.
Answer c
The demand equation will be
P = a-bQ
P = 160 – 0.133Q