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2. Total revenue falls as the price of a good is raised, if the demand for the good is ( )

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

1. On Market Failure – We said that the rationale for public policy is either market failure and/or government failure. Address the following with this rationale in mind:

availability of substitutes, and justify how you determine the price elasticity of demand for your firm’s product. b) Explain the factors that affect consumer responsiveness to price changes for this product, using the concept of price

Throughout this task I will do my best to explain how firms determined to maximize profit do just that. Specifically I will delineate how such firms choose the optimum level of production or output for the goods they produce and how they behave with respect to various elevations of marginal revenue. In my attempt it will be appropriate for me to clarify the definitions of various economic terms in order to assure a proper understanding of my thoughts on this topic, I will provide these definitions throughout.

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:

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Explain the meaning of the terms ‘market failure’ and ‘the efficient use of resources’ and analyse

9. If the demand for a good is perfectly price inelastic in the short run and the supply curve is upward sloping, imposing a sales tax on the good will

11) By how much would the profit contribution of product A has to increase before it will be profitable to produce A?

and lead to still greater uses of vehicles. This is tolerable where the population is

This assessment will be an analysis of graphed data and changes in supply and demand for three economic problems. Problem A involves production possibilities for consumer and capital goods, problem B is an evaluation of changes in supply and demand equilibrium, and finally, problem C involves pricing with relevance to supply and demand. Successful completion of this assessment demonstrates proficiency in; applying theories, models, and practices of economic theory, analyzing solutions with support from relevant data, resources, references, and economic principles, analyzing graphed and circular

·         The vehicles that are being sold are expensive so selling such products would have a good impact on the economy.

Competition failure or monopoly may result from natural monopoly where it costs incurred in production becomes lower when only one firm is involved in production than several firms producing the same output. In a monopolist market under-production, higher prices become dominant contributing to market inefficiency. Winston cites cases of misuse of monopoly power can lead to market failures and sometimes may lead to acute shortage of essential commodities (130).

The world today is developing rapidly is every aspect of human life whether be it the technology, money or population. This change in the surroundings has made humankind to worry about the future. The advancement in technology nowadays is more focused towards the optimum utilisation of the exhaustible natural resources. The increase in population has resulted in the increase of the sale of automobiles as well.