Economics: Supply & Demand

This economics assignment explores key concepts of supply and demand. Students analyze the impact of various factors on price and quantity demanded for goods like petrol, beef, and commercial apartments. The assignment also delves into price elasticity of demand and its implications for businesses. Lastly, it examines profit maximization strategies using a hypothetical company called 'Happy Enterprise'.

ECONOMICS

Question 1
a) High fuel efficient petrol cars
In the first case, the supply of petrol is less but the quantity of demand will be high when
the price of a fuel is higher as there is no substitute available for the car's consumer (Reyes and
Sawyer, 2015).
b) Car use liquid case
In that second case, the demand of petrol is less when the liquid gas price has not
increased as it is a substitute of car. The customer will prefer to choose liquid gas rather than
petrol as it the price is higher.
Question 2
a) Normal good beef if the income level increase
The Beef is a normal good so, if there is an increase in the income level than the demand
of such type of product will be increased (Gomes and Sweeney,c2014).

b) High quality of cattle feed
The customers are ready to purchase cattle feed if the price of that product is increase as
the quantity of demand will be increased.
c) Spread of mad cow diseases

The government of beef manufacture countries stop ordering for mass slaughter as there
is spread of mad cow disease and also give warning to its customer. For this reason, government
should increase the price of product so, the customer quantity of demand will be decreasing.
Question 3
Assuming that if there is an increase in the commercial apartments that is new at the
Sydney that means that the supply of that product or services is increasing (Nowacki and Olszak,
2014). On the other hand, there is a decrease in the demand of new apartments in Sydney

From the above graphs and diagram that show that if the supply is increased that it shift
to the right or upwards that is S1. Thereafter, if the demand of a new commercial apartments is
decreased that shift leftward or downward that is D1. Thus, the impact on the price and quantity
of demand is that the price is decrease and the quantity of demand will also be decrease.
Question 4
a) Price elasticity of demand
% Change in quantity= $25-$18/( 25+18)100
%Change in price= $2.75- $4.00/(2.75+4.00)100
Elasticity of demand= 16.27/18.51 = 0.87
Change in price of % are proportionally divided change in demand of quantity %
(BÁRCENA‐RUIZ and CASADO‐IZAGA, 2014). Thus, there is negative sign that it will be
ignored. There is inverse relationship among price and demand is which yield negative value of
demand or price. From above calculation elasticity of demand is 0.87 that shows that it is a
relatively inelastic.
b)Importance of elasticity value
The importance of elasticity value is that it helps the business owner to set the price of a
product or services. It helps them to understand what extant they get profit by set a unique
pricing structure. It provides information to the company's owner products is that they can able
to get the competitive advantage or not (Gallet, 2014). Thereafter, it helps the organisation to
determine the changes in quantity demanded of a product relatively impact on the price changes.
Question 5
Happy enterprise adopts the profit maximising strategy in which they focus on
maximising its profit. For which they make the high quality of product and better marketing.
They sale their product or services into the target market to earn profits at effective cost.
Profit maximising can be attained at that level of output where the marginal revenue are
equal to marginal revenue.

Happy enterprise should generate level of output at 3 units as the marginal revenue is 4
equal to marginal cost 4. Thus, it will maximize its profit in a 12 when it produced 3 level of
output.