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Submitted By Linaaaaaaaaaa
Words 1413
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Student name: Jiaqi Song
Student number: 520812

Subject code: ECON10004

Subject code: Introductory Microeconomics

Assignment 1

Question 1

a) The information in Attachment 1 suggests that a decrease in demand for iron ore by Chinese steelmakers. Because attachment 1 mentions that price decrease which result in a decrease in demand for iron ore by Chinese. As shown in diagram 1 below, the price of steel dose down from P1 to P2, thus the quantity supplied of steel decrease from Q1 to Q2, which means there are less demand for iron ore. And the article also shows that an increase in the price of iron ore. Price increases leads to a decrease in quantity demanded of iron ore. And price goes up lead to a movement along the demand to the left. This also makes a decrease in demand for iron ore by Chinese. Therefore, demand for iron ore by Chinese makers decrease.

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b) As the demand for iron ore by Chinese decrease, the demand curve shift to the left. The new equilibrium price lie on the demand curve D2(graph above) which is lower than original equilibrium price on demand curve D1. The decrease in demand will also cause a decrease in quantity demand traded from Q1 to Q2. The Baltic dry index is based on the equilibrium price. Therefore, the Baltic dry index will decrease.

c) There are going doubts about what the Baltic Dry is actually signalling because the index change will caused by demand change or supply change or both of them change. For example, the index increase will be caused by the demand increase or the supply decrease or demand increase more obviously than supply decrease.

Question 2 a) The information is not enough to determine the main reason of changing in price is the changing in demand. There are many reasons can change the price. A shift in the demand curve, either to the left or right will changed the price.

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Mbjdh

...MON TUE MAR WED THU FRI SAT SUN MON TUE APR WED THU FRI SAT 1 2 3 4 5 6 8 9 10 11 12 13 15 16 17 18 19 20 22 23 24 25 26 27 29 30 31 2012 SUN MON TUE 7 14 21 28 5 6 7 12 13 14 19 20 21 26 27 28 SUN MON TUE 1 2 3 8 9 10 15 16 17 22 23 24 29 JUNE WED THU FRI 4 11 18 25 4 5 6 7 11 12 13 14 18 19 20 21 25 26 27 28 SUN MON TUE 1 2 3 8 9 10 15 16 17 22 23 24 29 30 31 FRI SAT 1 2 3 4 5 6 8 9 10 11 12 13 15 16 17 18 19 20 22 23 24 25 26 27 29 30 AUG SUN MON TUE WED THU FRI 7 14 21 28 MAY WED THU FRI SAT JULY SAT WED THU SAT 6 7 13 14 20 21 27 28 2012 1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 24 25 26 29 30 31 SEPT WED THU FRI SAT 3 4 5 6 7 10 11 12 13 14 17 18 19 20 21 24 25 26 27 28 OCT SUN MON TUE WED THU 1 8 15 22 29 FRI 2 9 16 23 30 SAT 1 2 3 4 5 6 8 9 10 11 12 13 15 16 17 18 19 20 22 23 24 25 26 27 29 30 31 NOV SUN MON TUE WED THU FRI 7 14 21 28 5 6 7 12 13 14 19 20 21 26 27 28 SUN MON TUE 1 2 3 8 9 10 15 16 17 22 23 24 29 30 31 DEC WED THU FRI 4 11 18 25 SUN MON TUE SAT SAT 2 3 4 5 6 7 9 10 11 12 13 14 16 17 18 19 20 21 23 24 25 26 27 28 30 1 8 15 22 29 7 14 21 28 1 2 3 4 5 6 8 9 10 11 12 13 15 16 17 18 19 20 22 23 24 25 26 27 29 30 31 4 5 6 7 11 12 13 14 18 19 20 21 25 26 27 28 1 2 3 8 9 10 15 16 17 22 23 24 29 30 2 9 16 23 30 3 4 5 6 7 10 11 12 13 14 17 18 19 20 21 24 25 26 27 28 31 1 8 15 22 29...

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