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Assignment For Econ 1011

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110 views

Assignment For Econ 1011

Uploaded by

demilie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Addis Ababa University

College of Business and Economics


Department of Economics
Group Assignment for the course Introduction to Economics 1st Year Extension Students
Instruction:
 Write the Name, and ID; as well as handwriting should be neat and eligible
 COPYING EACH OTHER IS STRICTLY FORBIDDEN!!
 Review all the necessary materials to address the questions
 Due date: March 2, 2023. Late submission will not be accepted and score null mark
 Each group should not include more than six members
 You may submit it either in hard copy (with good hand writing) or through my email address,
[email protected]
1. Discuss the three economic problems, and show in detail on how can it be solved by capitalism and
command/socialism?
2. How do you relate the concepts of scarcity, opportunity cost, and efficiency to one another and the
economics discipline?
3. Explain the difference between normal-vs-inferior good and complementary-vs-substitute good.
4. Assume that a certain simplified economy produces only two goods, X and Y, with given resources
and technology. The following table gives the various possible combinations of the production of the
two goods (all units are measured in millions of tons).

Production Possibility Good X Good Y Opportunity Cost of


Good X
A 0 100
B 2 90
C 4 60
D 6 20
a. Calculate the opportunity cost of the production of good X at each point. What law does the trend in
those values exhibit? b) What changes are required for this economy to shift the PPF outward?
5. The market for lemon has 10 potential consumers, each having an individual demand curve P = 101 -
10Qi , where P is price in dollars per cup and Qi is the number of cups demanded per week by the i th
consumer. Find the market demand curve using algebra. Draw an individual demand curve and the
market demand curve. What is the quantity demanded by each consumer and in the market as a whole
when lemon is priced at P = $1/cup?
6. The demand for tickets to an Ethiopian Camparada film is given by D(p)= 200,000- 10,000p, where p
is the price of tickets. If the price of tickets is 12 birr, calculate price elasticity of demand for tickets
and draw the demand curve
7. Given market demand Qd = 50 - P, and market supply P = Qs + 5
a. Find the market equilibrium price and quantity?
b. What would be the state of the market if market price was fixed at Birr 25 per unit?
c. Calculate and interpret price elasticity of demand at the equilibrium point.
8. When price of tea in local café rises from Br. 10 to 15 per cup, demand for coffee rises from 3000
cups to 5000 cups a day despite no change in coffee prices.
a. Determine cross price elasticity.
b. Based on the result, what kind of relation exists between the two goods?
9. Based on the following table which indicates expenditure of the household on a commodity, answer
the questions that follow ( The price of the good is Br.10 )

Income ( Br. / month) Quantity Demanded ( units / month )


10,000 50
20,000 60
30,000 70
40,000 80
50,000 90
a. Calculate income elasticity of demand, if income increases from Br.10, 000 to Br. 20,000 and if
income increases from Br.40, 000 to Br. 50,000.
b. Is this a normal or an inferior or a luxury good? Justify.
c. Does the proportion of household income spent on this good increase or decrease as income
increases? .Why?
10. Why does the quantity of salt demand tend to be unresponsive to changes in its price?
11. When the price of tea in local café rises from birr 10 to birr 15 per cup, demand for coffee rises from
3000 cups to 5000 cups a day despite no change in coffee prices.
a. Determine cross-price elasticity.
b. Based on the result, what kind of relationship exists between the two goods?
12. If the demand function of a good be given by: Q dy =3000−3 P y + 2 P x −0.5 I then if
P y =5 , P x =10 , I =1000 .
a. Justify that good x and good y are substitute goods
b. Briefly disuse that whether good y is normal good or inferior good
c. Compute and interpret price elasticity of demand, cross price elasticity of demand and income
elasticity of demand

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