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Eco Qs Assignment 4

Business Economics Assignment

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Muhammad Aftab Ahmed
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14 views

Eco Qs Assignment 4

Business Economics Assignment

Uploaded by

Muhammad Aftab Ahmed
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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INSTITUTE OF BUSINESS MANAGEMENT

COLLEGE OF BUSINESS MANAGEMENT

ECO 409 Business Economics

Assignment # 4 Due Date: 12-10-2019

Note: Read the related topics from Chapter 4 and 5 plus go through the class lectures
carefully before solving this assignment.

1. Using supply-and-demand diagrams, show the effect of the following events on the market for sweatshirts. [Explain step by
step like we did in the class]
a. A hurricane in South Carolina damages the cotton crop.
b. All colleges require morning exercise in appropriate attire.
c. Both ‘a’ and ‘b’ occur together and the effect of ‘a’ is greater than the effect of ‘b’
d. Both ‘a’ and ‘b’ occur together and the effect of ‘a’ is smaller than the effect of ‘b’

2. Because bagels (a product like donuts) and cream cheese are often eaten together, they are complements.
a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be
responsible for this pattern—a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer.
b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What
could be responsible for this pattern—a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer.

3. Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:

a. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii)
vacationers? (Use the midpoint method in your calculations.)
b. Why might vacationers have a different elasticity from business travelers?

4. Suppose that your demand schedule for DVDs is as follows:

Use the point method to calculate your price elasticity of demand as the price of DVDs increases from $8 to $10 if (i) your
income is $10,000 and (ii) your income is $12,000.

Note: The assignment should be hand written on foolscap sheets.

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