Economics Homework Essay

Question 5:

Production Possibility Frontier
(a)

Vegetables

A B

Flowers

When the farm employs new farming technology, it should be expected that production capacity in both flowers and vegetables will increase, as illustrated by the shift of production possibility frontiers from point A outwards to B.
When workers are not engaged in productive activities in the firm due to recession, the production capacity would lower, and thus the curve will shift from point B back to A.
If the farm employs more workers, it would shift back to B due to the increased production capacity of the firm.

Multiple Choices 1

It will shift to the right because cure for lung cancer will increase its consumption
It will shift to the left as the demand will decrease due to price increase
It will shift to the right because incomes make them to be affordable
It will shift to the left due to increase in price of its complimentary product that reduces its demand too.
It will shift the demand to the left since the laws will be restrictive to its consumption
and hence its demand.

It will shift to the left since demand would decrease due to price increases.

Increase in market population will increase demand for petrol, which will stimulate increase in supply.
If buyers’ income incomes decrease, the demand will also decrease, and suppliers will have to reduce their productions
If buyers expect the price to rise in future, the demand for it will increase now, as they buy to stock and avoid future costs, and so will its supply.

Since automobile is a complimentary good, increases in its prices will decrease the demand of petrol.

New technology will increase the supply of oil, as it will increase its drilling capacity.
If the suppliers expect the prices of petrol to increase in future, they will hoard it, and therefore they will decrease the capacity of supplies now by 50%.
If the price falls deeply, although the demand for it will increase, suppliers will be discouraged to produce due to the anticipated loss.

Session 2: Post Class Exercises

If the current rental price is $1,200 the quantity demanded will tend to increase at 800, while the quantity supplied will decrease to 400, since suppliers are not motivated with low prices.

Only, 400 apartments will be rented out, as the price would have increased to discourage customers.

Question 2
In perfectly competitive market, the quantity of goods demanded is inversely related to the price, keeping other things constant.
Change in quantity demanded occurs by the movement along the demand curve, but a change in demand is represented by the shift of the entire supply curve.
When the price of coffee as a substitute increase, the equilibrium price of it will also increase because, there will be demand for it.
Efficient ingredient for lung cancer will cause its equilibrium price and quantity to reduce since people will be demanding cigarettes more.

Efficient method of processing tea leaves will increase its equilibrium price and quantity.

Recession will reduce purchasing power of consumers, and thus equilibrium quantity and price will decrease.