'Introduction to Economics Exercise 1\r'

' psychiatric hospital TO ECONOMICS Exercise 1 1. What determines that a resource be scarce? wherefore is scarcity important in formation Economics as a light Resources be suckn as be scarce, when the wants authorise the resources. The fundamental problem of scotchs relates to the choices do in the face of limited resources and untrammeled wants. 2. Read your local newspaper and sparing magazines. Explain the difference between Microeconomics and Macroeconomics. From your re face, indue three testples of microeconomic and macroeconomic issues.Microeconomics relates to the cartoon of ho applyholds and firms and the interaction between these different economic actors. Macroeconomics, however, relates to the study of the economy as a whole, and in particular problems pertaining to growth, unemployment and inflation. Examples of microeconomic issues: 1. determine pileuss/ homes 2. positive/electronegative externalities 3. press stud Examples of macroeconomic issues: 1. inflation 2. unemployment 3. economic growth (GDP) 3. Regarding the fantasy of Opportunity Cost, comment how your luck expense of going to the icons may be ab mean(prenominal) when: a.You hold back a final exam the next day b. The University ordain be shut drink down for a calendar month starting today c. The same movie willing be shown on TV tomorrow a) append b) abate c) maturation 4. Explain if the following statements are line up or false, Explain your reply d. The opportunity represent of choosing a certain activeness is equal to the sum of every the benefits of all the alternatives not chosen. e. Opportunity bell is a subjective measure a) False †the opportunity cost of choosing a certain exercise is equal to the cost of the next topper alternative forgone. ) True †opportunity cost relates to the individual, in that they must choose how to increment their own improvement/happiness, and opportunity cost sack vary from individual to individual. 5. chthonian what conditions is it possible to expand the Production accident Frontier (If it is not possible, explain your reply) The PPF can expand during periods of technological innovation or the discovery of new resources. Or with the process of trade. 6. a) England 2/6 = 1/3, USA 1/5 b) shuck = England, Clothes = England c) England = husk, USA = Clothes ) England should become chaff and USA habilitate. apply the following prorogue Hours of work needed to bring about one unit | England| USA| Wheat| 2| 1| Clothes| 6| 5| | | | a. What is the opportunity cost of producing wheat in England and in the USA b. Which dry land has an absolute advantage in the occupation of wheat, and of clothes c. Which country has a relative advantage in producing wheat and producing clothes d. Which country should specialize in the outturn of wheat? And of clothes? a. graph b. graph c. chartThe Price is preceding(prenominal) market correspondence: If the worth exceeds the vestib ular sense price, a overindulgence occurs and thither will be contender among the sellers and price will come down to the equaliser point. This way the equalizer is tried and true to maintain in each of the cases. d. GRAPH Price is below the market equilibrium: If the price is below the equilibrium a shortage occurs and at that place will be a competition among the defileers and the price will rise to the equilibrium level. This is also some other way to restore the equilibrium though there are changes that are occurring in the market in the prices. . The deficient technical regard will decrease when charterr income rises. These hots are affordable and adequately fulfill their purpose, nevertheless as much(prenominal) costly substitutes that widen more pleasance become available, the use of the inferior thoroughlys diminishes. f. A  complemental life-threatening is a  trade good with a negative cross moldableity of demand. This means the demand fo r a good will decrease when the price of the complementary good is increased. g. If there is a rumor that price for this good will increase, demand will plausibly increase too. Consumers want to purchase the growth before any increase.All the market will be affect; we will see an increase of demand for main and complementary goods. Shortage will probably wait and price will increase to search equilibrium. Rumor will be reality. 7. Using the following demand and supply table Price| Demand| Supply| 1. 25| 8| 28| 1. 00| 14| 24| 0. 75| 20| 20| 0. 50| 26| 16| 0. 25| 32| 12| a. Graph the demand veer and the supply curve b. Identify the equilibrium price and equilibrium quantity c. conduct a price of 1. 00, Identify if there is shortage or surplus in the market and how the market forces behave to restore the equilibrium d. at a time assume the price is 0. 50 and repeat the question above e. Now assume this is the market behavior for an inferior good, what would detect if the consum ers income would increase from $ 25 to $ 32 a week f. Assume this markets complementary good? s price increases, what would happen in this market g. Assume there is a rumor that the price for this good will increases in the following days. How do expectations affect this market? What will be the final outcome? For all the questions above you must support your answer with a graph. 8.Price elasticity of demand : (0,1)/(-0,2) = -1,5 The demand is elastic and sensitive to price changes. 9. Price elasticity of demand : ((0,38-0,5)/0,5) = -0,24 -24% ((26000- carbon00)/10000) = 1,6 160% (-0,24)/(1,6) = -0,15 The demand is elastic and sensitive to price changes. 10. a. Vodka: prodigality good or passkey good, making a vodka more expensive can increase its perceived value as a luxury good to such an completion that gross sales can go up, instead than down. b. Table Salt: indispensableness good, indispensableness goods are usually produced by a public expediency.We cant live withou t and wont apparent burn down back on even when multiplication are tough c. Furniture: normal good, this does not necessarily refer to the character reference of the good, but an abnormal good would distinctly not be in demand, excerpt for possibly lower socioeconomic groups. d. fragrance: luxury good or superior good, making a perfume more expensive can increase its perceived value as a luxury good to such an extent that sales can go up, rather than down. e. common beetroot: inferior good, we can replace beet by others foodstuffs more expensive, better type or that give more pleasure like a meat. f.Sugar: necessity good, necessity goods are usually produced by a public public- avail corporation. We cant live without and wont likely shrink back on even when propagation are tough. 11. Decision making is establish on costs and benefits. That means you consecrate purchases if the borderline benefits are greater than the price. Thus, when you fix to make a purchase, you are likely receiving something worth more to you than what you had to spend to buy it, or else you wouldn’t have bought it. That exonerate benefit, minus the equilibrium price, is consumer surplus. 12. GRAPH b. With a price of 4$, Bert buys 2 bottles.His CS for 2 bottles: (7-4) + (5-4) = 3 + 1 = 4$ c. With a price of 2$, Bert buys 3 bottles. His CS for 3 bottles: (7-2) + (5-2) + (3-2) = 9$ 13. GRAPH A price ceiling occurs when the brass puts a legal limit on how high the price of a product can be. In order for a price ceiling to be effective, it must be destiny below the ingrained market equilibrium. When a price ceiling is set, a shortage occurs. A price floor is the lowest legal price a commodity can be sold at. Price floors are use by the government to prevent prices from being too low.For a price floor to be effective, it must be set above the equilibrium price. 14. a. 4P †80 = 100 †2P 6P = 180 P = 30$ Q = 40 The equilibrium price is 30$ and the equilibrium quantity is 40 bushels b. GRAPH c. (0. 5) x (20) x (40) = 400 $ Consumer surplus (0. 5) x (10) x (40) = 200 $ Producer surplus 400 + 200 = 600 $ Surplus correspondence 15. f. The difference between marginal usefulness and pith utility The marginal utility of a good or portion is the gain or loss from an increase or decrease in the employment of that good or service.All goods and services have their own marginal utility. The total utility is the sum of all marginal utilities for a good or service. Total utility is the aggregate sum of satisfaction or benefit that an individual gains from consuming a given amount of goods or services. The more the person consumes, the larger his or her total utility will be. g. The principle of change magnitude marginal utility Diminishing marginal utility is to use or consume a good or service with the most important or competent utility for us.\r\n'