Microeconomics Answers

3.1

Use a graph to explain the effect of an imposition by the government of

a maximum price in the face mask market.

(7)

3.2

Briefly describe any four (4) factors that could result in a product having

an inelastic demand.

(8)

explain the relationship between elasticity and revenue

following equations respectively:

Demand: P= 1400 - 2Qd

Supply: P = 200 + 10sI

1.1

Calculate the equilibrium price and quantity of shoes.

1.2

Assume that the price of shoes is R700. Use your answer in 1.1 to exp

the resulting situation in the market for shoes, and how equilibrium

be restored without government intervention, ceteris paribus.

When developing LTSM, both the needs of the educator and the learner needs to be taken into consideration. Why do you think this is so?

Suppose that market demand can be represented as p = 100 - 2Q. There are 10 identical firms producing an undifferentiated product, each with the total cost function TC = 50 + q

2

q2

. Compare the competitive outcome with the cartel outcome. What is the individual firm's incentive to cheat on the cartel?

Assume in a two-sector economy made up of agriculture and manufacturing, the government

introduces a subsidy of y per hour on labour in the manufacturing sector. What will be the

effect of the policy on the equilibrium wage, total employment as well as employment in

agriculture and manufacturing?

Suppose the following information describes the economy of a hypothetical country::

C        = 200 + 0.9Y_d

I         = 100

G        = 250

X        = 200

Z         = 50 + 0.12Y

t       = 20%

Using the multiplier approach, calculate the equilibrium income.

• A. 1925
• B. 1750
• C. 2950
• D. 2000

Following are the demand and supply function of a market

QD A = 8000 - 1000Px, QS A = - 4000+2000Px

i) Find out the market clearing price and quantity.

ii) Plot, on one set of axes, the market demand curve and the market supply curve

for commodity A and show the equilibrium point.

iii) Is the equilibrium stable? Explain.

Do we need cashless transactions what are the modes of cashless transactions

State whether each of the following is true, false or uncertain and explain why.

a) If a good is a normal good. then the substitution effect and the income effect are of the same sign.

b) If a consurner has Cobb-Douglas preferences, it is possible for one of the goods to be a Giffen good.

c) If a consumer has quasi-linear preferences over two goods, then her consumption of neither good depends on her level of income.