...1. Coffee bun market Research and certified by economists and scholars, market structure has 4 types of market. It comprises of perfect, monopolistic, oligopoly and monopoly. Each market has its own characteristics and features which the businessman are required to master so that they are able to apply the business strategy sophisticatedly. First of all, it is perfect competition. In this market type, there are a lot of small firms and customers. Thus, both sides do not have any effect on price. Besides, the products sold in this market are identical to the sellers. And because product is homogenous and consumers do not care the brand name, it leads to a strong competition among the sellers to gain the most attention from consumers. Moreover, the entry of market is free. There is almost no object to prevent new firms from entering the market. So it is very easy for them to come in and compete with the existing firms. And if they feel the profits from the business not as much as they want, they also leave the market without prevention. One more thing is that the information about price and products in the market are observed and updated well by both sellers and buyers, so they know which suppliers are offering same products with lower price than another. For example, selling cabbage belongs to perfect competition where the sellers and buyers update their own information about price daily. And the buyer can choose any seller which they provide the lower price than another in...
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...Week 7 assignments Task 1: Consider the following table of costs for the Winsome Widget Factory, which operates in a perfectly competitive market. The market price faced by this firm is $6.00 per widget. a. Fill in the formula for AFC, AVC, ATC, MC, TR, MR, and Total Profit at the top of the column in the gray section within the table. b. Fill in the missing values for TFC, TVC, AFC, AVC, ATC, MC, TR, MR, and Total Profit in the blue sections of the table. | Winsome Widget Factory | |Output |Total Fixed Cost | |Barnes & Noble books |-4.00 | |Coca-Cola |-1.22 | |Cigarettes |-0.25 | |Beer |-0.23 | |Gasoline |-0.06 | In your project, address the following questions: Using the elasticity estimates in the table above, classify the price elasticity demand as elastic or inelastic. Explain your reasoning. Explain the implications of those classifications on tax revenue collections when the per-unit tax increases as opposed to decreases. Using those classifications, make some assumptions regarding tax incidence. For instance, will buyers...
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...Final Project Microeconomics The microeconomics assignments have taught me that microeconomics is a branch of economics that studies the behavior of individuals and small impacting players in making decisions on the allocation of limited resources. Typically, it applies to markets where goods or services are bought and sold. A socialist economic system is based on some form of social ownership of the means of production, which may mean autonomous cooperatives or direct public ownership; wherein production is carried out directly for use. Where markets are utilized for allocating inputs and capital goods among economic units, the designation market socialism is used. When planning is utilized, the economic system is designated a planned socialist economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind or a direct measure of labor time as a means to value resources and goods. Islamic economics refers to the economic system that conforms to Islamic scripture and traditions. Islamic finance belongs to the category of religious ethical finance, like Christian finance. A mixed economy is an economy that combines elements of capitalism and socialism, mixing some individual ownership and regulation. Some capitalist countries employ what is often called state capitalism. In this form of a mixed economy, the state becomes a major shareholder in private enterprises. An alternative is for the state to own some industries while leaving...
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...Microeconomics Paper One Renee Ingram Chamberlain College of Nursing Econ312: Principles of Economics Spring 2013 MICROECONOMICS 2 Every day individual consumers make choices for products they feel are needed in their lives. Whether out of comfort or necessity, the choices made can determine the standard of living for the individual. Research by McConnell, Brue, and Flynn (2012) argue, “Even though biologically people need only air, water, food, clothing and shelter,” once these basic needs are met, the other items desired are only to make one’s life more comfortable (McConnell, Brue, & Flynn, 2012). However, the choices made by these individuals have one obstacle, and that is how does one chose to use limited resources so as to satisfy these unlimited wants. This is where the idea of economics comes into play. Economics is defined as the basic study of supply and demand of goods in a market structure, and how this market is driven by self-interests of individual consumers for their unlimited wants. For consumers, McConnell, Brue, and Flynn (2012) suggest, “Individuals look for and pursue opportunities to increase their utility---they allocate their time, energy, and money to maximize their satisfaction” (McConnell, Brue, & Flynn, 2012). Since goods or services are limited, the self-interest of individuals will drive them to choose one product or service over another in order to maximize their comfort. Bearing in mind the above stated...
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...Explain, in your own words, why profit maximization happens at the point where MR = MC, and not where MR is greater than MC. Refer to Figure 7.2 Should the 4th unit of output be sold? What about the 5th unit, 6th unit, 7th unit, 8th unit, 9th, or 10th unit? Use your understanding of MR = MC rule to explain. I have to say that this question was the hardest discussion question for me so far through out the class. I think most people are confused by total revenue and total cost and marginal revenue and marginal cost. Marginal revenues is defined as the change in total revenue when more unit of a product is sold. Marginal cost is the cost that arises by producing one more unit of a product. It is not the same as the total cost that results out of fixed and variable costs and neither to total revenue that is the total money a firm receives by selling its products. However profit is when you subtract total cost from total revenue. Thus if marginal cost and marginal revenue are the same they cross each other out. It is is the perfect output level without adding additional costs. If you look at table 7.2., the best output is at products 9 where marginal cost and marginal revenue are $131 which is also the price of one unit sold. The maximum profit of $ 299 is reached. I think as soon as you have total economic profit you should sell. The consumers need to get to know the product and like it in order to buy more, thus in this case you should start selling at the 4th unit up...
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...ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Economics) WARNING 1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE. 2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM POLICY”. Course: Introduction to Micro Economics (801) Semester: Autumn, 2010 Total Marks: 100 Level: M.Sc Economics Pass Marks: 40 ASSIGNMENT No. 1 (Units 1–5) Q.1 How is the Microeconomics different from macroeconomics? Discuss also the subject matter of microeconomics in detail. (20) Q.2 Compare the consumer behavior under Cardinalist and Ordinalist school of thought. (20) Q.3 What is meant by elastic demand and inelastic demand? Write the formulas for point elasticity and arc- elasticity. How can elasticity at a point along a linear demand curve can be determined by inspection? (20) Q.4 Explain long-run laws of return to scale in detail. (20) Q.5 Explain the statement “that the shape of cost curve plays an important role in decision making”. (20) ASSIGNMENT No. 2 (Units 6–9) Total Marks: 100 Pass Marks: 40 Q.1 Explain short run and long run equilibrium of a firm in a perfect competitive market? (20) Q.2 How price discrimination exists and which are the necessary conditions, must be fulfilled for its implementation? (20) Q.3 Determine the equilibrium price and output when a monopolist...
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...Project part I product | Estimated elasticity | Barnes & Noble books | -4.00 | Coca-Cola | -1.22 | Cigarettes | -0.25 | Beer | -0.23 | Gasoline | -0.06 | BARNES & NOBLE BOOKS Barnes & Noble Books are elastic. The price of elasticity is always negative. In comparing elasticities we are interested in their size. So we drop the minus sign and compare their absolute values. The estimated elasticity is 4.00 which are greater than the absolute value of 1.00 so this good is elastic. Since Barnes & Noble Books are elastic a proposed tax increase will have an increase in price which will reduce the total revenue. Because books are more money people buy less and the distributors share the tax burden which decreases their total revenue + a decrease in sales. Buyers will pay a larger portion of the tax because it does not matter whether the buyer or seller pays the tax. It is all relative either way they pay the same amount. Relative to the quantity being sold. COCA-COLA Coca-Cola is an elastic good. If demand is elastic then an increase in price due to an increase in taxes will reduce revenue for Coca-Cola. You will then have a decrease in quantity demanded also because this good is a substitute. Again as in Barnes & Noble Books buyers will pay more tax than the sellers will. CIGARETTES Cigarettes are inelastic because they are less than the absolute elasticity value of 1. Because cigarettes are inelastic an increase in price due to the tax increase...
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...Microeconomics * Elasticity * Price Elasticity of Demand * a measure of the responsiveness of quantity demanded to changes in price * addresses the percentage change in quantity demanded for a given percentage change in price * Coefficient of price elasticity of demand (E sub d) = Percentage Change in Quantity Demanded/ Percentage change in price * From Perfectly Elastic to Perfectly Inelastic Demand * Ed > 1 = Elastic * Ed <1 = Inelastic * Ed = 1 = Unit Elastic * Ed = Infinity = Perfectly Elastic * Ed = 0 = Perfectly Inelastic * Elastic Demand and Inelastic Demand * Elastic Demand: If the numerator (percentage change in quantity demanded) is greater than the denominator (percentage change in price), the elasticity coefficient is greater than 1 and demand is elastic * Inelastic Demand: If the numerator (percentage change in quantity demanded) is less than the denominator (percentage change in price), the elasticity coefficient is less than 1 and demand is inelastic * Unit Elastic Demand and Perfectly Elastic Demand * Unit Elastic Demand: If the numerator (percentage change in quantity demanded) equals the denominator (percentage change in price), the elasticity coefficient is 1 * Perfectly Elastic Demand: If quantity demanded is extremely responsive to changes in price, the result is perfectly elastic demand * Perfectly Inelastic Demand * Perfectly Inelastic...
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...Curtis Barnes February 4, 2014 Microeconomics For a healthy economy, it is important that the producers of a product consider the consumers’ willingness to buy. When consumers choose a product they look for purpose. They try to get the most out of the product that they have purchased. They try to choose the product that best suits their desires and budget. They look for what is worth their money. Produces should take advantage of consumers economizing behavior. This is what gives consumers decision making which can be purposeful or rational. When making the decision the consumer will choose the cheapest item that benefits them. As long as the producers have products available at an affordable price and have purpose consumers will buy them. When confronted with two items the consumers usually make a marginal decision. This means they make a choice according to the difference of the items be it low prices or benefits between the items. The consumer will choose what best benefits them. Changes in the incentives can dictate the choices the consumers make. For example supply and demand, if the supply is high the demand will be low because there are plenty of the supplies. When the supply is low it gives producers a chance to raise prices, because the demand for the product will be high due to its limited resource. There are a lot of contributing factors that can control or dictate consumers buying product. Depending on the quality of the product a consumer is willing to...
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...The grape market is a perfectly competitive market which basically means that no one supplier has any influence over the market price. Thus the elasticity of demand is perfectly elastic (a change in price will result in a change in quantity demanded) and a horizontal line will form the demand curve. If a supplier raises their price 2 cents above the market price no one will buy their stock as there there are many other suppliers selling for 2 cents less. They also have no motivation to sell for less. Thus they can sell as much as they want for this price. Now because the elasticity of demand is so high there is no possible way for there to be an equilibrium. One day the market price for grapes might be $1/kg so a supplier sells 100kg. The next day the market price goes up to $2/kg so he decides to increase his sales to 200kg. In this way the market is too volatile for there to be any equilibrium. The supply curve is non applicable as supply is entirely dependent on what the farmer wishes to sell at the prevailing market price. By definition, structural oversupply refers to the situation where an entities natural production output recurrently reaches a level that exceeds the quantity demanded over a long period of time. This just means that over an extended period the amount supplied exceeds amount demanded. Such an occurrence is primarily due to the exaggerated mechanisms that contribute towards production. In reference to this...
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...Economics 2A Assignment 1 “Consumers are statistics. Customers are people.” Stanley Marcus (1905 –2002) In order to explain HOW economic theory determines the choices of the consumer, we need to know WHAT the theory states. We use the terms baskets or bundles for groups of items, consumer preferences to tell us how the consumer ranks those baskets according to his tastes and we do that by: 1. Assuming the preferences to be complete, and that the consumer can distinguish which basket he prefers, or whether they are indifferent to him. 2. When a customer enjoys basket A better than B, and B better than C we assume that the preferences are transitive and accept that for him A > C. 3. Finally we assume that the customer will always be glad to have more of a product than to have less, and more will raise the utility. John will be my example to explain the theory. His budget is £100. He likes two products: wine and cheese. The price per item is £5 for cheese, and £20 for wine. The budget line represents the maximum amount of either John can buy. To get the line we divide the budget by the price of the item, in order to get the maximum quantity of each bundle and then connect the points on the graph: Quantity of wine Quantity of wine 20 20 5 5 The slope of the line is ∆W/∆C = - (Pw/Pc) The slope of the line is ∆W/∆C = - (Pw/Pc) Quantity of cheese Quantity of cheese We can represent someone’s preferences with a function that we call utility function...
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...Brazil produces ethanol from sugar, and the land used to grow sugar can be used to grow food crops. Suppose that Brazil‘s production possibilities for ethanol and food crops are given in the table. a. Draw a graph of Brazil‘s PPF and explain how your graph illustrates scarcity. [pic] Figure 2.1 shows Brazil‘s PPF. The production possibilities frontier itself indicates scarcity because it shows the limits to what can be produced. In particular, production combinations of ethanol and food crops that lie beyond the production possibilities frontier are not attainable. b. If Brazil produces 40 barrels of ethanol a day, how much food must it produce if it achieves production efficiency? If Brazil produces 40 barrels of ethanol per day, it achieves production efficiency if it also produces 3 tons of food per day. c. Why does Brazil face a tradeoff on its PPF ? Brazil faces a tradeoff on its PPF because Brazil‘s resources and technology are limited. For Brazil to produce more of one good, it must shift factors of production away from the other good. Therefore to increase production of one good requires decreasing production of the other good, which reflects a tradeoff. d. If Brazil increases its production of ethanol from 40 barrels per day to 54 barrels per day, what is the opportunity cost of the additional ethanol? When Brazil is production efficient and increases its production of ethanol from 40 barrels per day to 54 barrels per day...
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...The firm as price taker The single firm takes its price from the industry, and is, consequently, referred to as a price taker. The industry is composed of all firms in the industry and the market price is where market demand is equal to market supply. Each single firm must charge this price and cannot diverge from it. Equilibrium in perfect competition In the short run Under perfect competition, firms can make super-normal profits or losses. In the long run However, in the long run firms are attracted into the industry if the incumbent firms are making supernormal profits. This is because there are no barriers to entry and because there is perfect knowledge. The effect of this entry into the industry is to shift the industry supply curve to the right, which drives down price until the point where all super-normal profits are exhausted. If firms are making losses, they will leave the market as there are no exit barriers, and this will shift the industry supply to the left, which raises price and enables those left in the market to derive normal profits. In the long run The super-normal profit derived by the firm in the short run acts as an incentive for new firms to enter the market, which increases industry supply and market price falls for all firms until only normal profit is made. Evaluation The benefits It can be argued that perfect competition will yield the following benefits: 1. Because there is perfect knowledge, there is no information failure and...
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... PRINCIPLES OF MICRO-ECONOMICS COURSE OUTLINE – FALL 2012 CREDIT HOURS DURATION DEPARTMENT COURSE LEVEL RESOURCE PERSON OFFICE HOURS E-MAIL 3 17 weeks Finance and Business Economics Division Core Prof. Taimoor Qureshi By Appointment taimoor.qureshi@ucp.edu.pk COURSE DESCRIPTION Principles of Microeconomics is an introductory course that teaches the fundamentals of microeconomics. This course introduces microeconomic concepts and analysis, supply and demand analysis, theories of the firm and individual behavior, competition and monopoly, and welfare economics. Students will also be introduced to the use of microeconomic applications to address problems in current economic policy throughout the semester. COURSE OBJECTIVES After studying this course the students should be able to: Understand the basic concepts of the subject. Understand the application of the tools of demand and supply for efficient resource allocation and profit maximization. Identify core economic issues related to business firms. Comprehend the benefits of market efficiency. GRADING PLAN TYPE Quizzes Assignments Final Projects Midterm examination Final term examination Total PERCENTAGE (%) 10 10 10 30 40 100 CALENDER OF ACTIVITIES WEEK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 CONTENTS TASKS/ACTIVITIES Introduction to Economics • Basic Concepts – I Class Introduction Introduction to Economics • Basic Concepts...
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...Company XYZ produces bottled water. Internal consultants estimate the company’s production function to be Q = 300L2K, where Q is the number of bottles of water produced each week, L is the hours of labor per week, and K is the number of machine hours per week. Each machine can operate 100 hours a week. Labor costs $20/hour, and each machine costs $1000 per week. Suppose the firm has 20 machines and is producing its current output using an optimal K/L ratio. How many people does the firm employ? Assume each person works 40 hours a week. Recent technological advancements have caused machine prices to drop. Company XYZ can now lease each machine for $800 a week. How will this affect the optimal K/L ratio (i.e., will the optimal K/L ratio be smaller or larger)? Explain why. The firm can employ 50 workers per week. The calculation is as follows: Labor Cost (W) = $20 Cost per machine hour (R) = $10 [Machine cost per week/Hours per week ($1000/100hrs)] Marginal Product of Labor (MPL) = 600LK Marginal Product per Machine Hour (MPK) = 300L2 Using the optimal K/L ratio where Company XYZ produces its current output the marginal product of labor to the marginal product per machine hour will be equivalent to the labor cost per hour to the cost per machine hour (MPL/MPK = W/R): 600LK = $20 = 2K = 2 300L2 $10 L [2K=2L][1/2] = K = L If the firm therefore has 20 machines, there will be 2000 machine hours per week (100*20) and since machine hours is equivalent...
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