Assignment Task: Economics Principles
Learning Outcome:
I) Demonstrate their understanding of fundamental problem of scarcity faced in an economy.
II) Apply the microeconomic concepts of demand and supply, price elasticity, market failure, cost and revenue concepts.
III) Explain the importance of economic models and key assumptions in economics.
IV) Apply economic models and assumptions to analyze a given situation and/or media articles on economic issues.
Problem 1:
(i) Discuss how economists could apply fundamental economic Problems in the production of smart phones.
(ii) Explain the following Problems regarding the Production Possibility Frontier (PPF)
- The two (2) main assumptions of PPF
- Downward sloping shape of PPF
- Concavity of PPF to the origin
(iii) Illustrate and describe any ONE (1) situation that would shift the production possibilities frontier outwards.
Problem 2:
With a number of new orchards coming into production, Australia is expecting a bumper crop, with volumes up 9% from last year's, says Avocados Australia CEO John Tyas. Based on the industry's latest quarterly forecasting, the nation is set to produce 95,000 metric tons (MT) for the April 2019 - March 2020 period. Australia's avocado supply for January, February and March of 2019 increased by 20%, compared to the same three-month period last year.
(i) Explain any two possible (2) factors/scenarios which could possibly result in an increase in demand (NOT quantity demanded) for avocados.
(ii) Besides a bumper crop, explain any two possible (2) factors/scenarios which affect the supply of avocados.
(iii) Describe how market equilibrium "clears" the market of avocados.
(iv) Describe how a government intervention such as price controls (price ceilings or price floors) may not always lead to a desirable market outcome.
Problem 3: Calculate the price elasticity coefficient for Macadamia Nuts
|
Price per kg ($)
|
Quantity Demanded
|
|
(kilograms)
|
|
8
|
950
|
|
10
|
850
|
|
12
|
600
|
|
14
|
250
|
Please use point method and show all your workings
(i) Calculate and interpret the value of price elasticity of demand (PED) when the price of Macadamia Nuts rises from
i. $8.00/kg to $10.00/kg.
ii. $10.00/kg to $12.00/kg.
(ii) What do you observe with regards to the changes in the values of the price elasticity of demand in (i) above? Comment on the possible reason for the change.
(iii) Using the price elasticity concept, explain why central heating is less price elastic compared to Netflix subscription fees.
(iv) Explain any TWO (2) factors that affect price elasticity of demand. (PLEASE NOTE that this is NOT the factors that shift the demand curve)
Problem 4:
(i) Complete the table below to reflect the cost of the Quilton Electronics.
|
Total Product
|
Variable Cost (VC)
|
Fixed Cost (FC)
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Total Cost (TC)
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Average Fixed Cost
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Average Variable
|
Average Total Cost
|
Marginal Cost (MC)
|
|
(AFC)
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Cost (AVC)
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(ATC)
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|
0
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$0
|
$100
|
|
|
|
|
|
|
1
|
40
|
|
|
|
|
|
|
|
2
|
70
|
|
|
|
|
|
|
|
3
|
120
|
|
|
|
|
|
|
|
4
|
200
|
|
|
|
|
|
|
|
5
|
280
|
|
|
|
|
|
|
|
6
|
400
|
|
|
|
|
|
|
|
7
|
550
|
|
|
|
|
|
|
|
8
|
720
|
|
|
|
|
|
|
(ii) What is the level of output when the firm faces the least cost per unit of output?
(iii) Why does Average Fixed Cost (AFC) fall continuously while Average Total Cost (ATC) falls then rises?
(iv) Using the long run average cost curve, show the difference between internal economies of scale and internal diseconomies of scale.
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Attachment:- Principles of Economics.rar