Reference no: EM132664933 , Length: 2400 Words

ECO100 Introduction To Economics - King's Own Institute

1) Describe the key fundamental principles of microeconomic and macroeconomic theory
2) Explain how different markets work to determine prices, demand and supply and analyse the efficiency of markets
3) Examine and explain the relationships between the national economy, GDP and economic growth and the key macroeconomic variables such as inflation, unemployment, interest rates and money supply, and exchange rates
4) Apply economic theory to analyse and evaluate topical micro and macroeconomic issues in real world events and communicate arguments effectively in writing.

Problem-solving exercises and short report writing

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.

Topic: Problem-solving exercises and short report writing on Economics

QUESTION 1:
The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Suppose the supply and demand functions for widget-corn are:
QD = 100 - 5P (1)

QS = 5P. (2)

P is the price in dollar and Q is the quantity in kilograms.
a. Determine the market equilibrium price and quantity of widget-corn?
b. Calculate the consumer surplus, producer surplus, and total economic surplus at the market equilibrium.
c. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-corn sellers to charge $5 per kilogram.

(i) What type of price regulation policy is this? Briefly explain.
(ii) Calculate the impact of the policy on the quantity of widget-corn supplied and demanded.
(iii) Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus.
(iv) Is the outcome of the government's policy efficient and, therefore, maintained or abandoned? Explain in detail.

d. Using equations (1) and (2), sketch the demand and supply diagram and indicate your results from parts (a) - (d). Correctly label the diagram.

QUESTION 2:
Table 1: Production Capacity of COVID-FREE LAND.

Use information in Table 1 above to answer the following questions:
a. Using the above figures, graph the production possibilities Frontier (PPF) of COVI_LAND (Hint! Use Microsoft Excel, for accuracy)

b. In your own words, while making use of the graph that you have created in part a, explain what the PPF is. Cleary state all assumptions and properties of the PPF.

c. Normally, the people of COVID-FREE LAND demand of 3,000 sanitizers and 18,000 toilet rolls. Suddenly, there is outbreak of COVID-19 and the demand for sanitizers and toilet rolls increased to 4,000 and 20,000, respectively. How would COVID-FREE LAND meet its new demand. Identify and comprehensively discuss at least three possibilities or ways. (Hint: State any appropriate assumptions made).

QUESTION 3:
Many movie consumers who used to rent DVDs are now patronising online video rentals, especially, streaming services.

a. What impact did the advent of online video rentals and streaming have on the in-store movie industry? Use the demand and supply diagram to illustrate your answer. Pay attention to how the equilibrium quantity and price adjust. Make state all your assumptions.

b. Which would be more price elastic, the demand for Netflix online streaming or the demand for online movie rentals in general? Explain.

c. Would the cross-price elasticity of demand for online movie rentals and in-store movie rentals be positive or negative? What does your answer imply for the equilibrium price and quantity of online movie rentals? Use the demand and supply diagram to illustrate your answer.

d. Because of COVID-19 most people are staying indoors, yet they cannot afford online streaming movies, like Netflix. Should the government regulate the price of online streaming? In your answer, critically discuss the pros and cons of price regulation.

Attachment:- Introduction To Economics.rar