Draw the supply and demand diagram of apricots

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Reference no: EM132369870

Economic Problem-solving Exercise Assessment

Purpose: This assessment is designed to allow students to demonstrate their understanding of fundamental economic principles and tools and apply them to the solution of problems in business, government and individual behaviour. This assessment contributes to learning outcomes a, b and d.

Task Details:

Question 1 There are many firms and buyers in the apricot market. The demand and supply functions are:

P = 200 - 0.4Q^D (1)
P = 20 + 0.5Q^S (2)

where P is price dollars ($) and Q is the quantity kilograms

(a) Calculate the equilibrium quantity and price of apricots.

(b) Using equations (1) and (2), draw the supply and demand diagram of apricots and indicate your results from part (a). Correctly label the diagram.

(c) Calculate the consumer surplus, producer surplus and total surplus, and indicate your results on the diagram in part (b).
(d) Calculate the price elasticity of demand at the equilibrium price and quantity.
(e) (i) Given the answer to part (d), if the price of apricots increased by 10% by how much would quantity demanded change? Show working steps
(ii) Would total revenue (TR) increase or decrease? Explain your answer.

Question 2
(a) China produces only clothing and rice. Draw China's production possibility frontier showing the trade- off between the production of clothing and the production of rice. Label the horizontal axis, "Rice" and the vertical axis "Clothing".
(b) Explain why the production possibility frontier (PPF) is concave.
(c) State all the assumptions underlying the construction of a PPF.
(d) In relation to the PPF, explain the terms ‘Production Efficiency' and ‘Allocative Efficiency'.
(e) Suppose adoption of a new technology for growing rice lowers the cost of producing rice, allowing yields to increase by 100%. Show and explain the impact of this technological change on the initial production possibility frontier in part (a).

Question 3
"More than one billion of cups of coffee are consumed in Australia's cafes, restaurants and other outlets each year, an increase of 65 per cent over 10 years. People are drinking less ‘instant coffee' as espresso becomes more popular and new speciality coffee shops have been popping up all over Australia to satisfy demand for daily caffeine fix. Not only are people drinking more coffee, they are becoming more coffee- savvy and want premium brew even if it costs more."

Answer the following questions after reading the news clip above.
(a) Under what market structure would you classify the espresso coffee market, are firms price takers or price makers? Explain.

(b) With the aid of an appropriate economic model, explain why there has been such an explosion in the number of coffee chains in Australia over the past 10 years.
(c) Do you for see firms in the market making positive economic profit in the long run? Explain.
(d) Would the impact of government subsidy to each existing firm change your answer in part (c) in the short run? Explain.

Reference no: EM132369870

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len2369870

9/12/2019 3:36:44 AM

Application, analysis and solution approach for problem solving (30%) Excellent application and analytical ability, providing with precise theories and principles to apply. More sophisticated, structured, clear and succinct analytical and methodological tools for analysis. Originality and creativity of in-depth analysis and solution approach. Excellent demonstration on solution approach strongly supported by precise and extended graphs, tables and quantitative method. Written presentation (15%) Outstanding and professional level of written presentation with minimal errors. Arguments and explanations are clearly articulated in an extended and sophisticated manner. Excellent skills and effort demonstrated in synthesising and organising a sound, natural and logical framework of the structural flow (sections/arguments).

len2369870

9/12/2019 3:36:26 AM

Criteria Knowledge and understanding of economic concepts and theories (25%) High Distinction (85 – 100%) Excellent understanding and knowledge with great awareness of the key economic principles, relevant concepts and theories related to a range of topical economic and para-economic issues, with extended and deeper economic insight and ability to explain various economic phenomena in the real world. Critical thinking, logical argument and evaluation of economic problems (30%) Excellent, creative and flexible way of critical thinking exercised in identifying key issues. Demonstrated a great degree of own interpretation and critiques in establishing arguments for and against in a more sophisticated manner. Very comprehensive understanding of different evaluation methods and ability to creatively apply and compare the differences in evaluating more complicated and broader issues and problems. Discussion of strengths and limitations of the arguments leading to different finding and implications in greater details.

len2369870

9/12/2019 3:36:07 AM

3. You must follow the appropriate format explained below. Not following the appropriate format will cause a loss of some marks. o All written answers must be clearly typed and printed. Hand-written answers will NOT be accepted o All assignment questions and sub-questions must be typed in order at the heading o Answer each question on a different page. For example, if Question 1 (a) (b) (c) and (d) are answered on pages 1-2, then start Question 2 on page 3, etc. o You must analyse, explain and show how and why you reached your answers. Providing just answers without explanation will not receive full marks o You must also draw and include appropriate and relevant graphs and tables together in your explanation. Draw them using Microsoft Power Point/Word/Excel, not hand-drawn.

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