• Internal Code :
  • Subject Code : ECO 100
  • University : Kings Own Institute
  • Subject Name : Economics

Understanding of Fundamental Economics Principles

Table of Contents

QUESTION- 1

(A)

(B)

(C)

(D)

(E)

QUESTION- 2

(A)

(B)

(C)

QUESTION- 3

(A)

(B)

(C)

REFERENCES

Question- 1

(A)

By the time the chip price is $ 400, however 30 million chips will be sold and all revenue will be $ 12 billion. By the time the chip price drops to $ 350, 35 million chips will be sold and all profits will be $ 12.25 billion. All incomes increase with falling prices.

At that time the chip price was $ 350, 35 million chips would be sold, and all profits would be $ 12.25 billion. By the time a chip price is $ 300, 40 million chips will be sold and all revenue will drop to $ 12 billion. All profits decrease when the price falls.

(B)

The demand for standard chips is elastic. The Total Revenue test states that the elastic demand for units is the average price when the price changes and all profits are exhausted as before. At an average cost of $ 300 per chip, you can lower the price from $ 400 to $ 300 per chip. By the time a chip's price drops from $ 350 to $ 250, total sales will remain at $ 12 billion. With an average price of $ 300 per chip, unit demand is elastic.

(C)

The calculation of "Income Elasticity of Demand" is done through the following formula:

"Income Elasticity of Demand (YED)" = % change in demand / % change in income

This formula for "Income Elasticity of Demand" can be expressed as:

"YED = (New Quantity Demand – Old Quantity Demand)/(Old Quantity Demand) / (New Income – Old Income)/(Old Income)"

YED = (3.5 – 2) / (2) / (5000 – 3000)/(3000)

YED = 1.126

(D)

This formula for "Income Elasticity of Demand" can be expressed as:

"YED = (New Quantity Demand – Old Quantity Demand)/(Old Quantity Demand) / (New Income – Old Income)/(Old Income)"

YED = (5 – 4) / (4) / (5000 – 3000)/(3000)

YED = 0.375

The "Income Elasticity of Demand" is normal> 0. This means that the demand for rice is normal, which increases as the buyer's income increases.

(E)

The operation of the price system tells us that if the price of a good rises and income remains constant, consumers will buy less of that good, however the same will happen with Kritika. Conversely, if the price goes down, they are likely to buy more.

Question- 2

(a)

A "Production Possibility Curve" is concave to the original, since in each additional unit of good X more good units of Y must be sacrificed. The opportunity cost of delivering each additional unit of good A forever in a general step always that the production of good Y is lost. This is because the production variables are not mutually exclusive. The value varies productively and reflects the increasing costs of opo.

(b)

Technological advances benefiting the era of capital commercialization have just been demonstrated by outsiders. Expanding innovation to a more significant product based on similar sources of information can be interpreted as an external change in the PPF, as shown in this figure.

(c)

It is because country B allocates more resources onto producing capital goods, the total amount of capital goods produced will obviously higher than the country A's counterpart. As the result of increase in capital goods, more other consumption and capital goods will be produced. In general, country is to undergo a more rapid economic growth.

Question- 3

(a)

These are normal bad conditions for banana production, leading to a decrease in supply. Graphically, such a reduction signifies a shift in the supply curve to one side (see figure below), showing that suppliers are bringing fewer bananas at any price.

(b)

An increase in demand increases the stock price of a banana and a reasonable size.

The expansion in demand leads to a demand for excess funds at the initial price.

Overfunding demand will increase the price of bananas, and if prices rise producers will be willing to sell more, increasing production.

(c)

  • As a functional problem, prices and quantities often do not come close to equilibrium whenever possible.

  • When economic demand changes demand or supply, prices and quantities balance with the general characteristics of equilibrium.

  • Even if they approach a new equilibrium, prices will often be driven by a further adjustment of supply or demand towards a different equilibrium.

References

Cleaver, T., 2014. Economics: the basics. Routledge.

Mandel, M., 2012. Economics: The Basics. McGraw-Hill Higher Education.

Smith, P., 2016. Doing Economics. Routledge.

Stanford, J., 2011. Economics for everyone: A short guide to the economics of capitalism. RELATIONS INDUSTRIELLES/INDUSTRIAL RELATIONS, 66, p.3.

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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