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When policymakers make policies that change the costs and benefits that people face, they can alter behaviors. Explain with the relevant principle that you have studied.
George has spent Rs.5000 purchasing and repairing an old console, which he expects to sell for Rs. 8000 once the repairs are complete. He discovers that he needs an additional repair, which will cost Rs. 4000, in order to complete the repairs or he can sell the console as it is now for Rs.3000. What should he do?
The utility-maximizing rule is to choose the basket of goods that has the highest marginal utility of each good in the basket.
What kind of price rationing strategy should be implemented by government to provide renters with houses at affordable price? Also mention the impact of this strategy on equilibrium quantity and equilibrium supplied of houses?
Suppose there is a change in the demand of cold drinks from 700 Units to 1000 Units because of the fall in the price from Rs 15 to Rs 10. Calculate the price elasticity of cold drinks.
Based on the information given in the following scenarios, graphically illustrate the following changes in the equilibrium price and/or equilibrium quantity:
Note: You may use fictitious figures to motivate your answer. Your answer must include a discussion of the graph.
The market for coffee has been relatively stable in the past. However, following a labour union strike among factory workers, the wage rate of factory workers in the coffee industry was renegotiated upwards (increased). At the same time, a study was published claiming significant health benefits coffee from drinking coffee daily. Therefore, coffee has become more attractive to consumers.
The average revenue function for a commodity is p = 50 – 4q. Find edp when:
demand = 5 units ; price = Rs. 6. Find consumer’s surplus at price = Rs. 6
The utility function is u=(x-4)^2+(y-3)^2. Draw two indifference curves to show the above function
a) Explain two reasons why markets fail to provide social goods like street-lightings and parks
b) Explain the occurrence of asymmetric information in insurance markets.
c) To what extent are unequal incomes considered undesirable in a free market economy.
d) What is monopoly or market power ? To what extent monopoly power in the free market economy
is one form of market failure?
a) Outline the main factors that have led to the emergence of a monopoly.
b) Explain why a perfectly competitive firm is a `price-taker` while a monopoly firm ( a monopolist )
will be a `price-maker`.
