Economics Assignment: Analyzing Market Structures and Elasticity

This economics assignment analyzes various economic concepts. Section A explores the impact of supply and demand shifts in different scenarios, including changes in journalist salaries, news events, the Super Bowl, and bagel consumption. It also examines the effects of input price changes and professor's textbook requirements. Section B delves into the characteristics of perfect competition, including large numbers of buyers and sellers, homogenous products, free entry and exit, perfect knowledge, and the absence of transport costs. The assignment further investigates the hiring decisions of firms in perfect competition, focusing on the value of marginal product of labor and wage rates, and how these factors influence profit maximization. Finally, the assignment calculates and interprets the price elasticity of demand for envelopes, determining whether the demand is elastic, inelastic, or unitary elastic.

Running head: ECONOMICS ASSIGNMENT
Economics assignment
Name of the student
Name of the university
Author note

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ECONOMICS ASSIGNMENT
Table of Contents
Section A....................................................................................................................................2
Answer 1 a)............................................................................................................................2
....................................................................................................................................................2
Answer 1b).............................................................................................................................4
Answer 1c).............................................................................................................................5
Answer 1d).............................................................................................................................8
Answer 2)...............................................................................................................................9
Answer 3).............................................................................................................................11
Answer 4).............................................................................................................................12
Answer 5).............................................................................................................................15
Section B..................................................................................................................................18
Answer 1).............................................................................................................................18
Answer 2).............................................................................................................................21
Reference list............................................................................................................................24

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price
quantity
S
D
D1
ECONOMICS ASSIGNMENT
Section A
Answer 1 a)
Case 1
Figure 1 Decrease in supply
When the salaries of journalists go up, there is a leftward shift in the supply curve. As
journalist acts as an input in the production of the newspapers. When there is an increase in
the salaries of the journalists, the publishers of the newspapers will reduce the quantity of
newspaper supplied at any given amount of price (Ogloblin, Brown and Levernier 2018). As
the salaries of the journalists had to increase, the publishers will reduce the supply of
newspapers since they have to pay more to the journalists. This results in shifting of the
supply curve from SS to S1S1. The supply curve shifts to left which means the supply of the
newspaper decreases.

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price
quantity
D1
S
D
ECONOMICS ASSIGNMENT
Case 2
Figure 2 Increase in demand
When there is any kind big news event in the town which will be reported in the
newspaper, the demand of newspaper will increase (Cowen and Tabarrok 2015). People of
that town will demand more of the newspapers as a result of the big news. The people of that
particular town will be buying more newspapers because of that news. As a result of the big
news in the newspaper, the sales of the paper will go up resulting in increase in the demand
of the newspaper
Answer 1b)
Case1

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Price
quantity
SD2
D2
D1
ECONOMICS ASSIGNMENT
Figure 3 Increase in demand
When the Rams win the Super Bowl competition, the fans of the St. Louis will
demand more of the cotton T-shirts of the St. Louis (Bas, Mayer and Thoenig 2017). The
increase in demand will lead to an increase in the rightward shift of the demand curve from
DD to D1D1. As they will win the competition the fans will demand for more shirts of the
winning team. The rightward shift of the demand curve suggests that the demand for cotton
shirts have increased. This results to a rise in equilibrium as a result of rise in demand.
Case2

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Price
quantity
D2
D1
ECONOMICS ASSIGNMENT
Figure 4 Decrease in supply
Cotton is the input of the T-shirt of St. Louis Ram’s (Friedman 2017). The rise in
price of the cotton will cause the manufacturers of the T shirts to reduce the quantity supplied
at any given price. This will make the supply curve move left from SS to S1S1. As a result of
rise in the price
Answer 1c)
Case 1

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Price
quantity
S
D1
D1
D2
D2
ECONOMICS ASSIGNMENT
Figure 5Decrease in demand
When people realize how fattening bagels will make them, they will reduce
demanding bagels as it will lead to obesity. Consumers then will demand very few bagels as
any given price. For this reason the demand curve will be shifting to the leftward direction
(Friedman 2017). The demand curve therefore, moves left from D1D1 to D2D2. This will
lead to fall in equilibrium quantity as the equilibrium point changes from E1 to E2. As bagels
are harmful for health people will start demanding less bagels.
Case 2

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PRICE
Quantity
S
D1
D
ECONOMICS ASSIGNMENT
Figure 6Increase in demand
As people will be having less time for cooking breakfast they will be demanding more
bagels for breakfast. Consumers will be demanding more bagels which can be used as a
substitute for cooked breakfast at any given price (Ogloblin, Brown and Levernier 2018).
Increase in demand causes the demand curve to shift rightward from D1D1 to D2D2. It will
also lead to rise in both equilibrium price and quantity. The equilibrium point also rises to E2.
Consumers will be demanding mote bagels since they will be having less time for cooking
breakfasts.

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Price
quantity
SS
D
D1
ECONOMICS ASSIGNMENT
Answer 1d)
Case 1
Figure 7Increase in demand
When the professor makes it necessary for the required reading for economics
textbook of Wells and Krugman for all his students, the students will be demanding more
books. The sale will increase as the demand for those particular economics books will rise.
Therefore, a greater quantity of textbooks will be demanded at any given price. This will
show a rightward shift of the demand curve. As the professor had made this necessary for all
the student, people will be demanding more of the textbooks (Imbs and Mejean 2015).

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PRICE
QUANTITY
Demand
SS
S1S1
ECONOMICS ASSIGNMENT
Case 2
Figure 8Increase in supply
When the printing cost for the textbooks will be lowered with the use of synthetic
paper, producers will be printing more text books and therefore the supply of the textbooks
will increase. The textbook publisher will be offering more textbooks for selling at any given
price which will represent a rightward shift of the supply curve from S1 to S2. The
equilibrium quantity will increase and the equilibrium price will be decreasing. The
equilibrium point also falls.
Answer 2)
The features of the perfect competition includes:

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ECONOMICS ASSIGNMENT
 Large numbers of buyers and sellers: in case of the perfectly competitive market
there will be presence of large number of buyers and sellers. In case of perfect
competition there will large number of both buyers and sellers. The action of the
individual will never affect the price of the market. The reason behind this is that the
quantity offered by each producer is too small to affect the price of the commodity.
Therefore, it can be said that the market price cannot be changed by either by the
sellers or by the buyers of their actions.
 Homogenous product : another condition of the perfect condition is that the product
that will be offered should be homogenous in all respects. The commodity should be
of similar size, taste, quality so that the products are the perfect substitutes of each
other. This a reason why a single seller cannot charge a high price. This will make
him lose all his customers (Imbs and Mejean 2015). In case of perfectly competitive
all the firms supply and produce identical products which are the perfect substitutes of
each other. For this reason the elasticity of price of a product of the firm is infinite.
 Condition of free entry and exit of the firms: another important characteristics of the
perfect competition is the free entry and exit of the firms. There is an absence of any
kind of artificial restrictions which will prevent the entry and exit of the firms. The
firms will be having full liberty to choose either to stay in the market or to go outside
the industry.
 Perfect knowledge of the sellers and the buyers: the fourth feature of the perfect
competition is the perfect knowledge on the parts of buyers and sellers about the
market condition (Cowen and Tabarrok 2015). Both the buyers and the sellers know
about the condition of the market. The sellers also know about the potential sales at
different levels in the market.

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ECONOMICS ASSIGNMENT
 Absence of the transport cost: in case of a perfectly competitive market there is
absence of any kind of transport cost. The reason behind this is that when there will
be changes in price there will not perfect competition in the market. Therefor efficient
and cheap means of communication and transport are must.
 Absence of any kind of restriction: there will be no presence of any kind of restriction
which will be hindering the smooth functioning of the perfect competition. There
should be no control of the government or any kind of restriction on the pricing and
on the supply. All the above conditions are the features of the perfect competitive
market.
Answer 3)
In case of a perfect competition the firm will hire workers up to a point when the
value of the marginal productivity of labour will be equal to the wage of the labour. The firms