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ASSIGNMENT INTRODUCTION;
Assignment Questions
Q1
Consider the market for orange juice. In this market, the supply curve is given by QS = 100PJ −20PO, and the demand curve is given by QD = 1000−150PJ +100PC, where J denotes orange juice, O denotes Orange, and C denotes coffee.
1) Assume that PO = 10 and Pc = 8. Calculate the equilibrium price and quantity in the Orange juice market. (1 mark)
2) Suppose that a poor harvest season raises the price of oranges to Po = 15
a) Is it possible to reach a market equilibrium if the price of orange juice PJ remains unchanged? Why? How much quantity of orange juice will finally be exchanged on the market? (2 marks)
b) Find the market price necessary to restore equilibrium. Deduce the equilibrium quantity of orange juice. (2 marks)
3) Draw a graph to illustrate your answers. (1 mark)
Answer:-
Q2
Suppose the price elasticity of demand for the market of mobile phones is 0.90.
a. If all mobile-phone companies simultaneously increased their prices, will total revenue in the industry increase or decrease? (1 mark)
b. If a single mobile-phone company increased its price, would you expect the company’s total revenue to increase or decrease? Explain. (2 marks)
c. Suppose that the price in the market is initially $10 and the quantity demanded is 100 units. If the price in this market increases by 10%, what will be the percentage change in the quantity demanded? (2 marks)
Answer:-
Q3
If you have SAR 50,000 to start a new business, you can earn 10 percent interest on money in a bank account. Your business expenses are SAR 22,000 per year on rent, SAR 18,000 per year on supplies, and SAR 5,000 per year on part-time help. As for your expenses, your apartment costs you SAR 12,000 per year and your bills are an extra SAR 6,000 per year. What is your opportunity cost of running the business? (4 marks)
Answer:-
HOW TO WORK ON THIS ASSIGNMENT ( EXAMPLE ESSAY/ DRAFT)
Introduction
In this essay, we will discuss the market for orange juice, the price elasticity of demand for the market of mobile phones, and the opportunity cost of running a business. By analyzing the given information, we will be able to understand the concepts of market equilibrium, price elasticity, and opportunity cost in economics.
II. Market for Orange Juice
- Equilibrium Price and Quantity The supply curve for orange juice is given by QS = 100PJ – 20PO, where QS is the quantity supplied of orange juice, PJ is the price of orange juice, and PO is the price of oranges. On the other hand, the demand curve for orange juice is given by QD = 1000 – 150PJ + 100PC, where QD is the quantity demanded orange juice, and PC is the price of coffee.
Assuming that the price of oranges (PO) is 10 and the price of coffee (PC) is 8, we can calculate the equilibrium price and quantity in the orange juice market. The supply and demand curve intersection represents the market equilibrium, where the quantity supplied and quantity demanded are equal.
- Effect of a Poor Harvest Season Supposes that a poor harvest season raises the price of oranges to PO = 15. If the price of orange juice (PJ) remains unchanged, it is not possible to reach a market equilibrium because the quantity supplied of orange juice will be less than the quantity demanded. As a result, there will be a surplus of orange juice in the market, and the price of orange juice will decrease until a new equilibrium is reached.
The market price necessary to restore the equilibrium can be calculated by setting the quantity supplied equal to the quantity demanded and solving for the price of orange juice. At this new equilibrium, the quantity of orange juice exchanged on the market can be calculated.
- Graphical Illustration A graph can be drawn to illustrate the effects of a poor harvest season on the market for orange juice. The chart would show the shift in the supply curve to the left and the intersection of the supply and demand curve at a new market equilibrium.
III. Price Elasticity of Demand for Mobile Phones
- Effect of a Price Increase The price elasticity of demand for the market of mobile
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