BEO1105 ECONOMIC PRINCIPLES SEMESTER 2 2017 Total = 25 marks. Marks will be converted to 20 per cent.
THE ASSIGNMENT MUST BE TYPED, HOWEVER THE GRAPHS CAN BE DRAWN BY HAND.
GRAPHS SHOULD BE CLEAR AND CORRECTLY LABELLED.
QUESTION 1
Using demand and supply graphs illustrate and explain the difference between a change in
quantity demanded of hats and a change in demand for hats. In your answer explain two
factors that will result in the change in demand for hats.
4 Marks
Using demand and supply graphs illustrate and explain the difference between a change in
quantity demanded of hats and a change in demand for hats. In your answer explain two
factors that will result in the change in demand for hats.
4 Marks
QUESTION 2
Using demand and supply graphs illustrate and explain the effect of the following events on
the market for solar panels (assume ceteris paribus). In your answer, include an explanation
of the market adjustment process.
(a) The price of solar panels is above the market equilibrium price.
(b) The price of electricity for an average household has decreased by 50 percent.
(c) The number of solar panel producers have increased by 50 percent.
2 + 2 + 2 = 6 Marks
Using demand and supply graphs illustrate and explain the effect of the following events on
the market for solar panels (assume ceteris paribus). In your answer, include an explanation
of the market adjustment process.
(a) The price of solar panels is above the market equilibrium price.
(b) The price of electricity for an average household has decreased by 50 percent.
(c) The number of solar panel producers have increased by 50 percent.
2 + 2 + 2 = 6 Marks
QUESTION 3
The demand for watermelon, which is harvested in summer, is highest during the summer
months and lowest during winter months. Yet watermelon prices are normally lower in
summer than in winter. Use demand and supply graphs to illustrate and explain how this is
possible. Clearly indicate the equilibrium price and equilibrium quantity in your graph.
3 Marks
The demand for watermelon, which is harvested in summer, is highest during the summer
months and lowest during winter months. Yet watermelon prices are normally lower in
summer than in winter. Use demand and supply graphs to illustrate and explain how this is
possible. Clearly indicate the equilibrium price and equilibrium quantity in your graph.
3 Marks
QUESTION 4
Ceteris paribus, at the same time when the demand for yoga services has increased the
government has also introduced strict regulations that has resulted in a fall in the number of
yoga providers. Using demand and supply graphs illustrate and explain the impact on the
equilibrium price and quantity in the market for yoga services?
4 Marks
HINT: There is more than one outcome.
Ceteris paribus, at the same time when the demand for yoga services has increased the
government has also introduced strict regulations that has resulted in a fall in the number of
yoga providers. Using demand and supply graphs illustrate and explain the impact on the
equilibrium price and quantity in the market for yoga services?
4 Marks
HINT: There is more than one outcome.
QUESTION 5
In 2003, when music downloading first took off, Universal Music slashed the prices of a CD
from an average of $21 to an average of $15. The company said that it expected the price
cut to boost the quantity of CDs sold by 40 per cent, other things remaining the same.
(a)
(b) What was Universal Music’s estimate of the price elasticity of demand for CDs?
Given your answer in (a), If you were making the pricing decision at Universal Music,
would you cut the price, raise the price or not change the price? Explain your
decision.
2+2 = 4 Marks
In 2003, when music downloading first took off, Universal Music slashed the prices of a CD
from an average of $21 to an average of $15. The company said that it expected the price
cut to boost the quantity of CDs sold by 40 per cent, other things remaining the same.
(a)
(b) What was Universal Music’s estimate of the price elasticity of demand for CDs?
Given your answer in (a), If you were making the pricing decision at Universal Music,
would you cut the price, raise the price or not change the price? Explain your
decision.
2+2 = 4 Marks
QUESTION 6
Assume the government has removed all entry restrictions in an industry resulting in the
creation of a perfectly competitive market structure. Using demand and supply graphs and
cost curves illustrate and explain how this move will impact on the long run profit of these
firms.
4 Marks
Assume the government has removed all entry restrictions in an industry resulting in the
creation of a perfectly competitive market structure. Using demand and supply graphs and
cost curves illustrate and explain how this move will impact on the long run profit of these
firms.
4 Marks
ScholarMatic: Explanation & Answer
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