Assignment: Introduction to Microeconomics
Answer any 7 of the following 9 questions.
1. Consider your decision about whether to go skiing for the weekend. Suppose thattransportation, lifttickets, and accommodation for the weekend costs $350. Suppose also that restaurant food for the weekend will cost $90, which is twice the amount normally spent on weekend meals. Finally, suppose that you have a weekend job that you will have to miss if you goskiing, which pays you $150 (after tax) per weekend.
What is the opportunity cost of goingskiing? Do you need any other information before computing the opportunity cost?
2. Suppose that the market for frozen orange juice is in equilibrium at a price of $2.00 per can and a quantity of 4,200 cans per month. Now suppose that at a price of $3.00 per can, the quantity demanded falls to 3,000 cans per month and the quantity supplied increases to 4,500 cans per month.
a. Calculate the price elasticity of demand for frozen orange juice between the price of $2.00 and $3.00. Is the demand elastic or inelastic?
b. Calculate the price elasticity of supply for frozen orange juice between the price of $2.00 and $3.00. Is the supply elastic or inelastic?
3. From the following quotations, what if, anything, can you conclude about elasticity of demand.
a. ‘'Good weather resulted in records wheat harvest and sent wheat prices tumbling. The result has been disastrous for many wheat farmers.''
b. ‘'Ridership always went up when bus fares came down, but the increased patronage never was enough to prevent a decrease in overall revenue.''
c. ‘'As the price of cell phones fell, producers found their revenue soaring.''
4. Explain the three economic concepts illustrated by the production possibilities boundary. Support it with a suitable example.
5. The following supply and demand schedules describe a hypothetical market for potash
|
Price ?($ per? tonne)
|
Quantity Supplied?(million tonnes)
|
Quantity Demanded?(million tonnes)
|
|
280
|
5.5
|
10.0
|
|
305
|
6.5
|
9.5
|
|
330
|
7.5
|
9.0
|
|
355
|
8.5
|
8.5
|
|
380
|
9.5
|
8.0
|
|
405
|
10.5
|
7.5
|
a. What is the equilibrium price of potash?
b. How much potash would actually be purchased if the price was $280
per tonne?
c. How much potash would actually be sold if the price was $380 per tonne?
d. At a price of $280 per tonne, is there excess supply or demand? How much?
e. At a price of $380per tonne, is there excess supply or demand? How much?
6. The following table shows the demand schedule for PlayStation video games.
|
Price
|
Quantity Demanded
|
Total Expenditure?(millions$)
|
|
A
|
?$35
|
400,000
|
?
|
|
B
|
?$40
|
390,000
|
?
|
|
C
|
?$45
|
350,000
|
|
|
D
|
?$50
|
320,000
|
|
|
E
|
$55
|
300,000
|
|
|
F
|
?$60
|
260,000
|
|
|
G
|
$65
|
230,000
|
|
|
H
|
?$70
|
190,000
|
|
a. Compute total expenditure for each row in the table.
b. Compute the price elasticities of demand between points A and B, B and C, C and D, and so on.
d. Over what range of prices is the demand for video games elastic? Explain.
e. Over what range of prices is the demand for the video games inelastic? Explain.
7. Visit the website of a newspaper or a news agency such as cbc.ca, and look for the news items concerning government policy or business decisions that involve the basic economic concept of opportunity cost. Write a brief explanation of the opportunity cost of the decision that you selected.
8. Housing building contractors start building new houses in response to trends in buyer's market. Visit the Statistics Canada, which provides housing data from 2012-2016.Answer following questions.
a. What has been the trend in the demand for new housing in Canada over the past five years, and what might explain this trend?
b. Has the trend in your province differed significantly from the Canadian trend? If so, what might explain any differences?
9. Supply consists of sellers offering products for sale. Visit www.amazon.ca and find a book that is of interest to you. Then click in ‘New and Used' beside rhe picture of the book's cover and see the various offerings of copies of that book in the marketplace. Does this market appear to be very competitive? Why/Why not?