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  • Subject Name : Economics

Economics - Question 1

Absolute Advantage

In the given scenario, it can easily be seen that Jenny has been producing 20 necklaces or 30 bracelets per hour, whereas Marry can only produce 15 necklaces or 15 bracelets in an hour. For finding out, who has been an absolute advantage, it’s very important to understand the actual concept behind the term. In economics, the actual principle of absolute advantage refers to the actual ability of an individual or a party to produce a larger or greater quantity, service, or product than the other competitors (Robinhood, 2020). Adam Smith has contributed to this process and has described this principle of absolute advantage in the major context of international trade that a person or company can produce a product at a lower price than other competitors.

Different skills are associated with persons and companies due to which absolute advantage is more for one company and low for another. Specifically, the input or time frame remains the same due to more skills, and a greater number of products are produced. So, in the given case, the absolute advantage is associated with Jenny because the production of necklaces is more than Marry's. The time frame taken is the same for both members. But the number of products produced by Jenny is higher. Jenny uses the same amount of resources, and in economics, Mary has a less absolute advantage. The gains obtained from the products are high for 20 necklaces so, the absolute advantage is more in the first case.

Economics - Question 2

Cost Opportunity

The value selected for action to get something is known as opportunity cost. When deciding for a specific goal, a cost is involved in which could be in the form of utility, time, and finance. Optimal decisions are made with the help of opportunity costs (Boyce, 2020). The value that is involved in opportunity cost can vary from one factor to another. Because if one member is taking an opportunity cost of price, others can consider utility. A person has to decide to forget something. The decision can be related to the company, personal life, studies, environment, governmental level, or economy. The biggest factors included in opportunity cost are price. The price factor can vary from the level of income because for a billionaire, and low-level income person preferences are changing.

The time frame for a decision is another factor that varies with the scenario of the situation. The efforts included in taking a decision are an important factor in opportunity cost. The enjoyment of perks is included in Utility. In the given case, Jenny produces 20 necklaces, so the opportunity cost of five necklaces is associated with Jenny while Mary produces only 15 necklaces in on the hour. The time and price opportunity costs are with Jenny because more perks are enjoyed by producing more necklaces in the same time frame that is given to Jenny.

Jenny’s opportunity cost = 20 necklaces in one hour- 15 necklaces produced by Mary in one hour

Jenny’s opportunity cost = 5 necklaces

Economics - Question 3

Price

Quantity Demanded

Quantity Supplied

4

1000

400

8

800

500

12

600

600

16

400

700

20

200

800

The equilibrium price is the price where the quantity demanded is equal to the quantity supplied. At the price level of 12, both of the quantities are equal, so the equilibrium is at the price level of 12. Equilibrium quantity is 600.

Economics - Question 4

At the price of 4, it can be indicated that the quantity demanded is 1000 and the quantity supplied is 400. There will be a shortage of about 600 units. Shortage of the quantity means that the demand for a certain product is higher than the supply of the quantity. The higher demand has led to a decrease in the supply of the commodity. The difference between the supply and demand when the demand is high will be a shortage of units. The shortage can also be determined by using the market equilibrium graph. The area below the market equilibrium point represents the shortage. On the other hand, Surplus represents the scenario when the quantity supplied is greater than the quantity demanded (Nuti, 2018 ). In the graph, the area above the market equilibrium point is known as the surplus quantity of that commodity. More precisely, the Surplus is about 900 units at the price of 16 and 20. The shortage is also of 900 units at the price of 4 and 8.

Economics - Question 5

By changing the price, the relative supply and demand for the product are changed. From the demand point of view, the increase in price will tend to decrease the demand for the product, and the demand curve in the diagram will rise, indicating the decrease. On the other hand, the increase in price will tend to increase the price of the commodity. The supply curve will fall, indicating the increase. 

Economics - Question 6

The lifestyle has enhanced the demand for luxury houses, and according to the law of demand, the increase in price will tend to decrease the demand, but the increase in demand will tend to increase the price. So an increase in demand for houses will lead to an increase in the prices of houses. Alternatively, the increase in prices will lead to an increase in the supply of luxurious houses. This concept can be elaborated by the given diagram.

In panel A, the increase in price has tended to rise in the demand curve, and the demand curve is shifted from blue to red. From the point of view of supply, the increase in the price of houses will lead to a fall in the curve of supply, as shown in panel C. The supply curve is shifted from blue to red curve. Suppose then we consider the opposite scenario that the prices of the houses have been decreased. The decrease in the prices has led to the fall in the demand curve, as shown in panel B. The demand curve is shifted from blue to red. In Panel D, the quantity supplied has been increased due to a decrease in the prices of the house as the supply curve has been shifted from blue to red.

Other than the effects of prices, there are many other reasons that can change the quantity demanded and quantity supplied of the curve. The reason or other factors that cusses to change the demand and supply of luxury houses are called the determinants of the houses. The changes due to the determinants can be elaborated by the following diagram:

In the diagram, the price has remained the same, but the demand has been changed due to the determinants. An increase in demand will be the expansion, and a decrease in demand will be a contraction.

In the diagram, the price has remained the same, but the supply has been decreased to point c. The increase in supply can be indicated at point B at the same price.

Some of the determinants of luxury houses are given as follows:

  • Prices of luxury flats
  • Income level of families
  • Rates and legal fees of luxury houses
  • Expectations in the changes of the prices in the future

References for Economics

Boyce, P. (2020, July 12). Opportunity Cost | Economics | Definition | 4 Examples. Retrieved from boycewire: https://boycewire.com/opportunity-cost-definition/

Nuti, D. M. (2018 ). Kornai: Shortage versus surplus economies. . Acta Oeconomica, .

Robinhood. (2020, June 19). What is Absolute Advantage? Retrieved from robinhood: https://learn.What is Absolute Advantage?.com/articles/7iVwBnf1eE65Bk8rVGTAlE/what-is-absolute-advantage/

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Economics Assignment Help

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