BUS 201 Microeconomics Assignment

Reference no: EM132503540

BUS 201/ECO 201 Microeconomics Assignment - Emirates College of Technology, UAE

Question 1 - You have a limited amount of money to invest and you like to do a business, but you are also afraid of risk, what kind of a business organization would you choose: a proprietorship or a partnership? Explain your choice.

Question 2 - Answer the following questions:

1. Define the principal-agent problem and give examples.

2. Explain three solutions that companies use to solve the principal-agent problem.

Question 3 - Solve the following problems on elasticity.

When the price of good X was AED 10, the quantity demanded was 90. Now the price of good X increased to AED 12 causing the quantity demanded to fall to 70.

1. Calculate the Price Elasticity of Demand, using the mid-point formula.

2. Calculate the change in revenue as a result of the price increase.

3. If you are the producer of good X, what should you do?

Question 4 - The following table shows the total utility for Mansoor which he enjoys from consuming quantities of good X and good Y. The price of good X is $ 2, while the price of good Y is $ 3. The budget that Mansoor has to spend on the two goods is $ 15.

1. Fill in the empty cells by calculating the marginal utility and the marginal utility per dollar for each good.

GOOD X				GOOD Y
Quantity	TU	MU	MU per $	Quantity	TU	MU	MU per $
0	0	-	-	0	0	-	-
1	32			1	60
2	60			2	108
3	84			3	144
4	104			4	168
5	120			5	180

2. Which combination or combinations of the two goods that meet one condition that maximizes Mansoor's total utility?

3. Which combination meets both conditions of maximum utility? Show all calculations.

Reference no: EM132503540

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