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Economics Assignment 1

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Economics 247 Assignment 1 Version B

This assignment has a maximum total of 100 marks and is worth 10% of your total grade for this course. You should complete it after completing your course work for Units 1 through 5. Answer each question clearly and concisely.

1. a. What would happen to the study of economics and opportunity cost if scarcity disappeared? (3 marks)

b. What is the difference between a "change in supply" and a "change in quantity supplied"? (3 marks)

2. Identify each of the following topics as being part of microeconomics or macroeconomics. (1 mark each)

a. the impact of a change in consumer income on the purchase of luxury automobiles

b. the effect of a change in the price of Coke on the purchase of Pepsi

c. the impact of a war in the Middle East on the rate of inflation in Canada

d. factors influencing the rate of economic growth

3. Suppose we are analyzing the market for hot chocolate. For each of the events given below, explain the impact of each of the following on demand or supply, the direction of the shift (left or right), and show how equilibrium price and quantity would change. (2 marks each)

a. A better method of harvesting cocoa beans is introduced.

b. The Surgeon General of the US announces that hot chocolate cures acne.

c. Protesting farmers dump millions of gallons of milk, causing the price of milk to rise.

d. Producers expect the price of hot chocolate to increase next month.

e. Consumer income falls because of a recession and hot chocolate is considered a normal good.

4. Use the graphs below to answer the questions that follow. (Please show your work for each question.) (2 ½ marks each)

a. Calculate Barney’s opportunity cost of one loaf of bread.

b. Calculate Betty’s opportunity cost of one pie.

c. Who has the

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