Microeconomics Answers

Suppose demand is given by Qd =1000-25P and supply is given by Qs=75P

(a) Calculate the equilibrium price and quantity.

(b) Assuming the demand curve changes to Qd =1000-5P, calculate the new equilibrium price and quantity.

(c) Use a diagram to illustrate your answer for part a and b.

The demand and supply curve of good B is linear and B is normal good. A is an input used to produce good B and the price of A increases.

(a) Illustrate the effects of this shock on a graph. Properly label all curves and axes.

(b) As a results of this shock, price and quantity will

(I) Increase, increase

(II) Decrease, decrease

(III) Increase, decrease

(IV) Remain same.

Hubert and Kate are farmers, each one owns a 12 acre plot of land. The following table shows the amount of corn and rye each farmer can produce per year on a given acre. Each farmer choose whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye on the rest.

Corn (Bushels per acre) Rye (Bushels per acre)

Hubert 12 3

Kate 15 5

(a) Plot the PPF curve for Hubert and kate

(b) What is Hubert’s opportunity cost of producing 1 bushel of rye?

(c) What is the Kate’s opportunity cost of producing 1 bushel of rye?

Define what a national minimum wage means through analysing its implications for the economy

PERIOD

QUANTITY

PRICE

INCOME

ADVERTISING

1

120

8.00

10

3

2

165

4.00

22

7

3

120

7.00

20

5

4

165

3.00

20

8

5

180

4.00

30

8

6

90

10.00

19

6

7

150

4.00

18

10.2

8

190

1.60

25

9.3

9

160

5.00

30

8

10

200

2.00

35

9.5

Linear Relationship

     a.         Use any multiple regression packages (eg. SPSS package) to estimate a linear relationship between the dependent variable and the independent variables.

     b.         Is the estimated demand function “good”? Why or why not?

     c.         Discuss the economic implications of the various coefficients.

     d.         Compute the price elasticity of demand and income elasticity of demand in period 10. Elaborate your answers.

Comparative advantage is based on

What is the nature of the fixed factor that is causing the law of diminishing returns in Microsoft’s

case?

Examine the impact on total revenue in terms of an elastic demand curve and inelastic demand curve. Use diagrams to motivate your answer.

A brief explanation of the public wage bill in SA –(Its advisable to illustrate trends by means of graphs and tables showing