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When the firm produces with fixed scale and only one input is variable while others remain constant, the firm is producing in the short run. *
True
False
Use supply and demand curves to illustrate how each of the following events would
affect the price of KitKat chocolate bar and the quantity of Kitkat bought and sold:
a. An increase in the price of Cadbury chocolate bar.
b. An increase in the price of Chocolate.
c. A decrease in average income levels.
d. Pandemic has caused cocoa harvest to drop drastically.
The crops price elasticity of demand for come with respect to pepsi was estimated to be +0.65.
Calculate and explain the percentage by which the quantity demanded of come will change if there is a 6% increase in the price of pepsi. You are advised to show your working.
3 marks
Q.1. Spinach and Corn Roti are often eaten together, they are complements.
a. We observe that both the equilibrium price of spinach and the equilibrium quantity of Corn Roti have risen. What could be responsible for this pattern-a fall in the price of corn flour or a fall in the price of spinach leaves? Illustrate and explain your answer. b. Suppose instead that the equilibrium price of spinach has risen but the equilibrium quantity of
corn roti has fallen. What could be responsible for this pattern- a rise in the price of corn flour or a
rise in the price of spinach leaves? Illustrate and explain your answer.
Cournot competitors
Use the price elasticity of supply concept and your own reasoning to judge whether the supply for each of the following products is either elastic or inelastic:
(i) Gold
(ii) Testing kits for Covid 19
( iii) Headphone
(iv) Moderna COVID 19 vaccine
Mary is a smart entrepreneur in her primary school. She sells ball points to her fellow school mates. At a price of $2.00 each, she sells 100. At a price of $1.50 each, she sells 300.
(i) Is Mary’s demand elastic or inelastic over this price range?
(ii) If demand had the same elasticity for a price decline from $1.50 to $1.00 as it does for the decline from $2.00 to $1.50, would cutting the price from $1.50 to $1.00 increase or decrease Mary’s total revenue?
1. Suppose a consumer has the following possible combinations of consumption:
Goods A B C D E F G
DVD (Y-axis) 0 2 4 6 8 10 12
(in thousands)
burger (X-axis) 6 5 4 3 2 1 0
(in thousands)
(a) Define opportunity cost.
(b) Use the data above to plot the budget line. What is the value of the slope of the
budget line?
(c) What is the opportunity cost of one more unit of DVD? Of one more unit of burger?
(d) Does the budget line indicate an increasing opportunity cost? Justify your answer.
(e) Explain how a decrease in the price of DVD affect the above budget line? What
happen to the budget line if the consumer income is doubled. Explain your answer.
(f) If the shape of the above budget line is con concave, explain how it will affect the
interpretation of the opportunity cost.
minimum wage law
HOW A TAX AFFECTS MARKET PARTICIPANTS ?
