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Explain the following through graph:
Does a change in price of raw material lead to a movement along the supply curve or a shift in the supply curve?
There are various examples of elasticity in our daily life. Write practical examples that impact on our life.
What does it mean to think like an economist?
In the world, every economy faces the same fundamental economic challenges. In regards to this statement explain briefly what are these basic economics challenges/issues?
Q-1: Do Microeconomics impact on our daily life? comment.
Explain the following cases through graph.
Does a change in consumers’ preferences lead to a movement along the demand curve or a shift in the demand curve?
Consider a demand function for a good given by X = 40-3P, asking if it determines the price corresponding to the unit elasticity.
Answer the following questions using the concept of elasticity:
a. Suppose a businessperson earns monthly revenue of Rs.500,000 by selling 500 school bags at Price 1000 per bag. The owner is thinking to raise its price of school bag to Rs.1500 per bag to increase its revenue. How would this increase in price affect the revenue under following conditions?
i. Price elasticity of demand for bag is less than 1 (e <1)
ii. Price elasticity of demand for bag is greater than 1 (e >1)
iii. Price elasticity of demand for bag is equal to 1.
b. Determine the price elasticity of demand for good X if:
i. there is no close substitute of good X
ii. the good X is a luxury good
iii. the good X is an addictive good
Assume that consumers always buy 20 units of good X each month regardless of its price.
a. Draw the demand curve for good X. Comment on the price elasticity of demand for good X and state its numerical value.
b. Give one example of a good which might have such a demand curve and explain. Comment on the availability of substitutes for this good. Comment whether this good is a luxury or a necessity good.
c. Referring to your answer in part (b), comment on the sign(s) and value(s) the following two elasticities might take and explain your reasoning:
• Cross price elasticity of demand between goods X and Y; where good X is the good in question and good Y is any other good. For this part consider all possible relationships between the goods.
• Income elasticity of good X.
Suppose the production cost of hand sanitizers decreases. If the demand for hand sanitizers is elastic, the quantity of sanitizers sold will be?
