Economics

Instructions

· Each Question carry equal marks.

· Provide full explanations of each part marked clearly.

· Single answer for all sections is not acceptable.

· Every Question must be explained in 200-250 words.

· All 4 questions be explained in 800-1000 words.

· You must consult with LRC to write your answers in correct language and APA Style.

· Write Date and Time of consultation to get 5 allocated marks.

Send you response to abdulv@vpcollege.com on October 2 or October 3. Do not send before or after mentioned days.

Date of consultation with LRC: ______________________ Time: ___________

Questions

1) Using graphs, explain what will happen to equilibrium price and equilibrium quantity of a product as a result of each of the following scenarios:

a. A rise in the number of buyers and a decrease in the cost of producing the product.

b. A decrease in the number of suppliers and an increase in the number of buyers.

c. An increase in the cost of production and a decrease in consumers’ income.

d. Advances in the technology used to produce the product and a decrease in the price of a substitute good.

2) Explain the shifts in demand and/or supply that can result in the following observations: (Assume the demand curve is downward sloping and the supply curve is upward sloping.)

(a) Both price and quantity rise.

(b) Price rises, quantity falls.

(c) Price rises, quantity doesn’t change.

(d) Quantity rises, price doesn’t change.

3) In each of the following cases, explain what effect the changes will have on the equilibrium price and quantity in the following markets:

Market

Change

a) computer technicians

The use of computers in business continues to expand; while at the same time, the number of graduates in computer technology program increases

b) anti-cholesterol drugs

The cost of producing anti-cholesterol drugs increases; and at the same time, medical problems associated with high cholesterol continues to increase.

c) full-sized SUVs

The government imposes a special excise tax on full-sized SUVs; while at the same time. Gas prices decrease dramatically.

d) organic spinach

Medical reports indicate that spinach is an effective anti-cancer food; while at the same time a new, faster-growing variety of spinach is developed

4) Assume the market for coffee is initially in equilibrium.

a) Draw a demand and supply diagram to illustrate the initial equilibrium.

b) Explain the impact on the market if there is simultaneously an increase in the price of coffee beans and a decrease in the price of tea.

c) Graphically illustrate the impact on the diagram you prepared for part (a).