BB106: Principles of Economics - Micro economic Concepts of Demand and Supply - Economics Assessment Answer

Assignment Task:

Question 1

1. Drawing from a real-world example, explain the ‘economic problem’.
2. Explain how the basic economic questions are used to allocate the scarce resources in the production of a wool jacket.
3. Discuss the difference between a positive and a normative statement. 
4. From the firms’ perspective, explain the concept of opportunity cost. 

Question 2

1. Assume that a country is presently located on a point at its production possibilities frontier.
2. Explain what impact (if any) the following events will have on its production possibilities frontier.
3. Improvement in the general education level for the working population.
4. Lower birth rate leading to the smaller labor force.
5. Increase in total investments in research and development An occurrence of natural disasters.
6. A deep recession leading to a brain drain and a loss in productive potential.

Question 3

1. Use the demand and supply theories learned in the lecture
2. Explain any two (2) factors that result in an increase in demand for Peckham pears. 
3. Explain any two (2) factors that result in a decrease in the supply of green capsicums. 

Question 4

1. Using diagrams where necessary, justify the following statements
2. Playing loud music is a negative externality.
3. Vaccination is a positive externality. 

Question 5

1. Calculate the price elasticity coefficient for blueberries.
2. Calculate the price elasticity of demand when the price of blueberries rises from $8.00/kg to $10.00/kg.
3. Calculate the value of price elasticity of demand changes when the price rises further from $10.00/kg to $12.00/kg. 
4. Describe the relationship between price and the price elasticity of demand. 
5. Explain any three (3) factors that affect the price elasticity of demand.
6. Calculate the total revenue for each price level and describe the relationship between the price and total revenue.
7. Using the knowledge of price elasticity of demand, identify and explain the pricing strategy of a firm if they want to maximize total revenue.
8. Please use the point method and show all your workings.

Question 6

1. Complete the table below to reflect the cost of the firm Aspex Instruments. 
2. Is the firm operating in the short or in the long run? 
3. What is the level of output when the Average Total Cost (ATC) is at the minimum?
4. How does Average Total Cost (ATC) interact with Marginal Cost (MC)?
5. Explain the law of diminishing marginal returns in production.

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