Economics
Name
Affiliation
Course
Date Question 1a:
Question 1b:
The oppourtunity cost for 100 more cars as indicated in the above graph is 2 houses
Question 1c:
The opportunity cost for producing the last 100 cars is from point B to Point A. which is 500 less 400 which later gives 100 last cars. The opportunity cost is therefore 8-0 which gives 8.
Question 1d:
This is not possible as the marginal cost for the production of 150 cars does not have less houses, hence the relativity of 10 houses is not possible.
Question 2a: Positive
2b: Positive
2c: Positive
2d: Positive
Question 3a:
This demand curve indicates that while the prices of products and services increased the demand reduced.
Question 3b
The demand curve indicates that when the price of products and service increases there is a decrease in the Quantity demanded by the customers.
Question 5 i:
P = 25 -0.5Q
P-25 = -0.5Q
0.5Q=25-P
Q = 12.5 -0.5P
However, P = 2
Thus, ∆Q/∆P = -0.5
Quantity Demanded at P=2
(2, 11.5)
Ed= -0.5(2/11.5) = -0.08696
Therefore there exist perfect elasticity in Demand
Question 5ii:
2Q = 10-2P
Q = 5-P
However, P=2
Thus, ∆Q/∆P = -1
Quantity Demanded at P=2
(2, 3)
Ed= -1(2/3) = -0.666667
There it shows inelastic Demand
Question 5 iii:
Qab= 21 – 1/4 (Pa + 1/5 Pb)
Where Pa=10 Pb=20 find Eab
However, Pa=10 Pb=20
Thus, ∆Q/∆P = -1/4
Quantity Demanded at Pa=10 and Pb= 20
(14, 17.5)
Eab= -0.25(14/17.5) = -0.2
This is inelastic demand
Reference
Akerlof, G. A., & Kranton, R. (2010). Identity economics. The Economists’ Voice, 7(2).
