Question 1a. Draw a production possibilities curve for a hypothetical economy producing capital goods andconsumer goods Illustrate economic growth and use (A) to represent an inefficientb. Explain the law of increasing opportunity cost.c. Explain why scarcity forces individuals and society to incur opportunity costs. Give three (3)specific examples.Question 2Market researchers have studied the market for orange juice, and their estimates for the supplyand the demand for orange juice per month are as follows:Quantity demandedPrice per gallon ($)250Quantity Supplied200600120030040050040015010050030050600200a. Using the above data, graph the demand for and the supply of orange juice. Identify theequilibrium point as E, and use dotted lines to connect E to the equilibrium price on the priceaxis and equilibrium quantity on the quantity axis.b. Assume that the government decided to set a price ceiling of $100 per gallon.i) Define price ceilingii) Explain three effects una inis legal maximum price will have on the supply of orange juice inthe market. (Draw a new hypothetical diagram to illustrate)Question 3a. Calculate the cross-price elasticity of demand for porridge oats and milk sold in a supermarketif at the end of last period, the price of the porridge oats rose from $150 to $210 and the demandfor milk sold, moved from 200 units sold to 180 units. State whether you think these two goodsare complements or substitutes.b. Consider the case where the manager of KFC finds that the number of two-piece mealsconsumed per week fell from 1200 to 1000 boxes when the price of its meals was increased from$400 to $520.i) Calculate the price elasticity of demand. Show your calculations.ii) If the KFC manager wishes to raise revenue, what is the appropriate action to take? (4 marks)c. Given that the demand function for banana chips may be written Qd-200-3p, where p is theprice for banana chips, and the supply may be written as Qs=30+2p. Determine the equilibriumprice and quantityQuestion 4a. Describe five (5) factors that influence the market demand for a product such as personalcomputers.b. Explain three (3) characteristics of the planned economy. Give one example for each.21175

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Question 1 a. Draw a production possibilities curve for a hypothetical economy producing capital goods and consumer goods Illustrate economic growth and use (A) to represent an inefficient

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter2: Economic Tools And Economic Systems

Section: Chapter Questions

Problem 3.7P

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