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Economics For Managers Essay

3028 words - 13 pages

Exercise 1
Question 1
a. Microeconomics
b. Macroeconomics
c. Macroeconomics
d. Microeconomics
e. Macroeconomics

Question 2

Given the graph of the production possibilities frontier, the main source of milk and ingredient of cookies are from cows. If the milk production is to be increased, the production of cookies will decreased, illustrated by the movement of quantity of milk and cookies produced, from point A to B. This is based on the opportunity cost applied in this situation. If the population of the cows grows, the economy in this industry grows along as well, and the producers are able to produce more cookies and milk, illustrated from the ...view middle of the document...

b. | Quantity of material supplied affects the price. As material price used to produce minivan rises, the producer lowers doen the production level of minivans, and increases the price of the minivans. |
c. | Technology affects the quantity of minivans supplied. As technology improved, it pushes the production of minivans in the market and lowers down its price. |
d. | The sports utility vehicles are the substitute for minivans. The rise in the price of the sports utility vehicles causes the quantity demanded for the minivans to increase from Q1 to Q2, evidenced by the shift of the demand curve to the right. As the demand for the minivans increases, the price of the minivans increases as well. |
e. | As the stock market crash lowers the people’s wealth, it directly reduces the buying power the people over the minivans. This is evidenced by the decrease of the quantity demanded for the van to move from Q1 to Q2, as the result of the shift of the demand curve to the left. As the quantity demanded for the minivans decreases, as a result, it decreases the price of the minivans as well. |

Tutorial 2
Question 1
a. As the technological advance reduces the cost of making computers in the market, it enables the producers to produce more computers which resulted in the shift in the supply curve to the right, which indicates the increase of the supply of computers in the market, from Q1 to Q2. This results in the reduction in the price of computers from P1 to P2, which increases the value of the consumer surplus, from (a), to (a) + (b) + (d) + (e). Due to the shift in the supply of computers, the producer surplus changes from (b) + (c) to (c) + (f) + (g). The increase in the quantity supplied increases the producer surplus, and at the same reduces the producer surplus as the price declines.

b. Adding machines are the substitute for computers. Since the technological advances improves the effective cost of producing the computers, which results in the decrease of the computer price in the market. This resulted in people to buy computer instead of adding machines. This causes the demand for adding machines to shift to the left, indicating the decrease of the quantity demand for adding machines from Q1 to Q2. As a result, the equilibrium price of adding machines decreases as well. The consumer surplus changes from (A) + (E) to (A) + (B), showing a net change in (E) – (B). The producer in the other hand, changes from (B) + (C) + (D) to (C) only. There is a net loss of (B) + (D) in the producer surplus and saddened the adding machine producers due to the technological advance in producing computers in the market.

c. As software and computers complement each other in the market, the reduction in the price of computers and the increase of the quantity of computers in the market affects the increase of people’s demand for software, which resulted in the shift of the demand curve for software to...

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