Economics Assignment: Price Elasticity, Public Goods, and More

This economics assignment explores fundamental concepts including the difference between causation and correlation, illustrating these with examples. It delves into the law of demand, changes in demand, and the relationship between supply and demand, providing real-world examples to clarify these principles. The assignment also analyzes price elasticity of demand, and discusses the impact of government regulations on market prices, using the example of super chicken. Finally, it identifies and explains public goods like streetlights and national defense. The assignment uses references to support its analysis and arguments.

BUSINESS

TABLE OF CONTENTS
Que.1................................................................................................................................................3
Que. 2...............................................................................................................................................3
Que.3................................................................................................................................................4
Que.4................................................................................................................................................5
Que.5................................................................................................................................................5
Que.6................................................................................................................................................6
Que. 7...............................................................................................................................................6
REFERENCES................................................................................................................................7

Que.1
Difference between causation and correlation
Correlation is the mathematical term that determine relationship between two things or events on
the other hand, causation is also a mathematical term but it is quite different from correlation
because it determines the cause, reason for some short phenomena or mathematical figure.
Correlation can not consider causation but causation can consider correlation because it can used
after correlation.
For example, correlation between ice cream sales and sunglasses sold. It interprets by causation
term such as any change in the value of one variable will lead change in the value of other
variable. According to correlation statement can be interpreted by relationship between ice cream
sells and sunglasses and give reason that it sales together because both are outdoor temperature.
Opportunity cost
It is economical term that can be defined to the value of the resource or alternative that
have to give up in order to choose something else.
Que. 2
A) Law of demand
According to the law, price and quantity of the product are inversely proportional to each
other. in other word, when price of the product is high as result decreases demand of the product.
while in other case, when demand of the product high as result decreases price of the product.
there is an specific example such as Smith’s granny used to buy apple only 1 kg due to high
price. But when apple price decreases due to good harvest as result demand of the product
influences.

B) Change in demand
The concept describes that shifting in the consumer demands for the purchasing of certain
product or service due to variation in the price. There is an example of Smith’s granny who
passed from a shop whereas she saw smartphone which is highly popular in the market then she
decided to take new smartphone (Cerreia and et,al., 2016). It can be illustrated that shifting in
consumer’s demand is based on the income level of them.
This occasion has happened with me when I was in my school that time, I used to buy food for
me that was quite costly because nearby has one shop only. But later on, two and three shops
have opened so, price of the product decreases and I bought more foods for my home as well.
This occasion highlights the laws of demand which I faced in academic times. Another occasion
was happened when I was going to buy foods then in the way I saw good water bottle that made
more attractive. Even I have bottle but I wanted that which I saw in the market. it shows the
concept of change in demand.
Que.3
The demand and supply are inversly proportional to each other such as when supply is more as
result demands and price of the product will fall. As same when demand is high then supply

prices of the product become raise. As same case implement for the oil price whereas demand for
the oil is decreased in the worldwide as well as decreases price of the oil. it shows suppply prices
of the products become high.
Que.4
As per the concept of demand and supply analysis can be stated that when demand of the
product is high as result supply will high but it is inversly proportional to the price. As per the
given scenario, apple prices has increased estimates 50% and government impose additonal tax
on peers that directly impact on the market price and quantity in the market for pears. For
example apple prices become high as result demand of the product decreses. While qunatity of
the pears in the market is decreased because customer does not prefer to lead high producivity of
the pears in the market due to high taxes (de Rassenfosse, 2020).
Que.5
a) The taxi drivers assumes that when fares of taxi rides will raise as result generate high revenue
on each demand because they believe that when price will chanage that leads change in
demanded quantity. It is the concept of price elasticity of demands.
b) Price elasticity of demand demonstrates relationship between price and quantity that is
demanded. In other word, price elasticity of demand is proportional to the percentage of change
in quntity demanded and inversly proportional to percentage change in price (Ibrahim and Kirkil,
2018).

Que.6
The maximum price of super chicken is set by retail stores estimates M8.40 per kg because
government has imposed a list of 13 goods that must be price controlled. In which super chicken
is also enlisted in the 13 goods list, so it automatically comes in demand in high range whether
price is high or not but people will buy super chicken. This is the main reason to set this price for
the super chicken. The issue can face by retailers if they sell live chicken at high cost or does not
have good quality (Rohrer, 2018).
Que. 7
Streetlight and national defence are the main public goods that I have used my life. Streetlight
and national defence are considered public goods because these are provided freely in the market
or firms cannot charge to people against of them. In addition, these are nonexcludable goods that
can use the lighting if they do not pay for them (Saviotti and Pyka, 2017).

REFERENCES
Books and Journals
Cerreia, S and et,al., 2016. Law of Demand and Forced Choice.
de Rassenfosse, G., 2020. On the price elasticity of demand for trademarks. Industry and
Innovation. 27(1-2). pp.11-24.
Ibrahim, H.A. and Kirkil, G., 2018. Electricity demand and supply scenario analysis for Nigeria
using long range energy Alternatives planning (LEAP). Journal of Scientific Research
and Reports, pp.1-12.
Rohrer, J.M., 2018. Thinking clearly about correlations and causation: Graphical causal models
for observational data. Advances in Methods and Practices in Psychological
Science. 1(1). pp.27-42.
Saviotti, P.P. and Pyka, A., 2017. Innovation, structural change and demand evolution: does
demand saturate?. Journal of Evolutionary Economics. 27(2). pp.337-358.