Introduction to Economics Assignment

Added on - 07 Apr 2020

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Running head: INTRODUCTION TO ECONOMICSIntroduction to EconomicsName of the StudentName of the UniversityAuthor note
1INTRODUCTION TO ECONOMICSTable of ContentsPart A: Microeconomics..................................................................................................................2Answer 1......................................................................................................................................2Answer 2......................................................................................................................................3Part B: Macroeconomics..................................................................................................................5References......................................................................................................................................10
2INTRODUCTION TO ECONOMICSPart A: MicroeconomicsAnswer 1a)Equilibrium is obtained at the intersection of demand and supply curve. From the abovedemand and supply, schedules demand and supply matches at a price of $140 andcorresponding quantity is 1600. Therefore, equilibrium price is $140 and correspondingequilibrium quantity is 1600.Figure 1: Demand, supply and equilibrium in TV market(Source: as created by Author)b)Table 1: New demand schedule for an increased incomePrice of TVs ($)Quantity demanded/month (New)Quantity Supplied/month200150025001801700220016019001900140210016001202300130010025001000
3INTRODUCTION TO ECONOMICSIn case of a normal good, a rise in income leads to a rise in demand. This rise in demandis reflected from a rightward shift of the demand curve (Fine 2016). After people purchase 500more TVs at every price, the demand curve will shift from DD to D1D1. Corresponding to thisthe new equilibrium is set at a higher price and higher quantity. The new equilibrium price is$160 and the new equilibrium quantity is 1900 TV sets.Figure 2: Effect of a rise in income(Source: as created by Author)Answer 2i)In figure 3, DD denote the initial market demand curve for banana and SS is themarket supply curve. E is the equilibrium point in the market as obtained from theintersection of DD and SS. The equilibrium price is P* and correspondingequilibrium quantity is Q*.
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