hat are the factors you consider to figure out the opportunity cost of a vacation to Gorakh Hill Station? 2.Efficiency and equality are examples of classic trade-offs in economics. Analyze each of the following statements from the standpoints of efficiency and equality. i. “Amid COVID-19, everyone in society should be guaranteed the best healthcare possible.” ii.“When workers lose their jobs, they should be able to collect Ehsas income support benefits until they find a new job.”
1.What are the factors you consider to figure out the
Hill Station?
2.Efficiency and equality are examples of classic trade-offs in economics. Analyze each of the
following statements from the standpoints of efficiency and equality.
i. “Amid COVID-19, everyone in society should be guaranteed the best healthcare possible.”
ii.“When workers lose their jobs, they should be able to collect Ehsas income support
benefits until they find a new job.”
2.Income elasticity of demand measures the responsiveness of demand to changes in income.
Explain what is happening to demand and what kind of good is being represented in the following
situations.
a) Income is rising, and income elasticity of demand is positive.
b) Income is rising, and income elasticity of demand is negative.
c) Income is falling, and income elasticity of demand is positive.
d) Income is falling, and income elasticity of demand is negative.
3.What can be said about the price elasticity of demand in each of the following statements?
i. “The Tikka delivery business in this town is very competitive. I’d lose half my customers
if I raised the price by as little as 10%.”
ii. “My economics professor has chosen to use the Mankiw textbook for this class. I have no
choice but to buy this book.”
iii. “I always spend a total of exactly Rs.1000 per week on coffee.
4 A news website reported (Feb. 17, 2020) that ridership of Karachi Metro Bus declined after a
fare increase: “There were nearly four million fewer riders in December 2019, the first full
month after the price of a token increased Rs. 25 to Rs.150, than in the previous December, a
4.3 percent decline.”
i. Use these data to estimate the price elasticity of demand for Karachi Metro Bus.
ii. According to your estimate, what happens to the Karachi Metro Bus’s revenue when the
fare rises?
iii. Why might your estimate of the elasticity be unreliable?
Draw hypothetical consumer’s indifference curves for Soft-drink and Pizza. Describe and
explain four properties of these indifference curves. (2 Marks) (Word count: 250 words
max.)
b) A student living in a university hostel has two options for meals: eating at the dining hall for
Rs.600 per meal, or eating a meal at Dhaaba for Rs.150 per meal. His weekly food budget
is Rs.6000.
i. Draw the budget constraint showing the trade-off between dining-hall meals and meals at
Dhaaba. Assuming that he spends equal amounts on both goods, draw an indifference curve
showing the optimum choice. Label the optimum as point A. (1 Mark)
ii. Suppose the price of a Dhaaba meal now rises to Rs.200. Using your diagram from part
(a), show the consequences of this change in price. Assume that our student now spends
only 30 percent of his income on dining-hall meals. Label the new optimum as point B. (1
Mark)
iii. What happened to the quantity of meals at Dhaaba consumed as a result of this price
change? What does this result say about the income and substitution effects? Explain. (1
Mark)
iv. Use points A and B to draw a demand curve for meals at Dhaaba. What is this type of good
called? (1 M
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