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Differentiate between public good and private good, giving two features of each.
With the aid of diagrams illustrate and then discuss why in the derivation of the aggregate
demand for private goods, the goods are summed horizontally while the summation is vertical
for public goods.
With the aid of an Edgeworth
box, illustrate and then discuss the above statement in light of Nozick’s Principles
In the market for sugar, there is an increase in the number of households in the market, at the same time there is an increase in the price of molasses(a substitute for sugar), use a graph to illustrate and explain the impact of these changes on the equilibrium price and equilibrium quantity of sugar.
Could John Rawls’ Principles of Justice have resulted in a better socio-political
outcome , discuss your response in detail.
ASSIGNMENT 1
The following table presents the demand and supply of Orange in the market. By using these data, answer the following questions.
Price (Rs)
week
Demanded(Millions)
Supplied(Millions)
2.00
1
100
30
2.20
2
90
40
2.40
3
80
50
2.60
4
70
60
2.80
5
60
70
3.00
6
50
80
a) Draw the demand and supply curves for the above market. If price of the commodity increases from 3 to 5 and elasticity is 2 each for demand and supply, calculate quantity demanded and supply of the commodity? Elaborate the term of elasticity with diagram. (5 marks)
b) Calculate the Price Elasticity of Demand (PED) and supply (PES) for the data and draw diagrams for respective PED and PES in the market. (5 marks)
c) If price is increased from 5 to 7, how quantity demanded and supply will react using simple linear programming model forecast and answer this question. (5 marks)
Q.3.2 The store selling rice makes a further discovery, when the price of couscous changes from R30 per kg to R26 per kg, then the quantity of rice demanded decreases from 1360 kg per month to 1238 kg per month. Use this information to answer Q.3.2.1 and Q.3.2.2 below.
Q.3.2.1 Use the point method to calculate the cross elasticity of demand for these products.
Q.3.2.2 Comment on the significance of your solution in Q.3.2.1.
Q.3.3 Identify three factors that are likely to affect the price elasticity of supply for rice. Clearly indicate the impact that each factor will have on the price elasticity.
These questions require application of economic theory relating to elasticity of demand and supply. All calculations must be shown in full. Answer ALL the questions.
Q.3.1 A store that sells rice discovers that when the price of 1kg rice Is R24 per kilogram, the quantity demanded is 306 kgs per week. When the price decreases to R21 per kg, then the sales increase to 340 kgs per week. Use this information to answer questions
Q.3.1.1 and Q.3.1.2 below. Q.3.1.1 Determine the price elasticity of rice using the Arc method.
Q.3.1.2 Discuss the relationship between the price elasticity of rice and the total revenue the store received from the sales. Advise the store on an appropriate pricing strategy.
Identify the relevant economic concept which can be matched to the descriptions below. Simply give the question number and the relevant terms/words in each case.
Q.1.1 Government sets a price level in a market that is aimed at assisting consumers.
Q.1.2 Quantity demanded is less than quantity supplied.
Q.1.3 A situation where the quantity supplied of a good is highly sensitive to a change in the price of the good.
Q.1.4 A curve showing combinations of two goods that provide a consumer with a constant amount of utility.
Q.1.5 The addition to total output when one more worker is hired, ceteris paribus.
Assume a firm engaging in selling its product and promotional activities in monopolistic competition face short-run demand and cost functions as Q = 20-0.5P and TC= 4Q2 -8Q+15, respectively. Having this information a) Determine the optimal level of output and price in the short run. b) Calculate the economic profit (loss) the firm will obtain (incur). c) Show the economic profit (loss) of the firm in a graphic representation.
A perfectly competitive firm has the cost function TC = 1000 + 2Q + 0.1 Q2. What is the lowest price at which this firm can break even
