ECONOMICS FOR BUSINESS

Economics for Business

Name of Writer

Name of Institution

Table of Contents

Question 14

Part A4

Part B6

Part C7

Question 210

Part A10

Part B12

Part C13

Question 314

Part A14

Market Structure14

Perfect Competitors market15

Monopoly market16

Monopolistic Competition Market16

Oligopoly Market17

Price & Output Determination18

Perfect Competition18

Monopoly18

Monopolistic Competition19

Oligopoly19

Natural Monopoly20

Advertising in Market Structure20

Part B20

Pepsi & Coke21

References23

Economics for Business

Question 1

Part A

Price

Qd

Qs

New Qd

New Price

7

20

120

60

6.5

6

60

110

100

5.5

5

100

100

140

4.5

4

140

90

180

3.5

3

180

80

220

2.5

2

220

70

260

1.5

1

260

60

300

0.5

If the price of oranges were to be set on $6 per case than there would be an excess supply of oranges in the market since the quantity demanded of oranges at $6 per case 60 where as the quantity supplied of oranges at $6 per case is 110, creating an excess supply of 50 cases per day.

If the price of oranges were to be set on $3 per case than there would be an excess demand of oranges in the market since the quantity demanded of oranges at $6 per case 180 where as the quantity supplied of oranges at $6 per case is 80, creating an excess demand of 100 cases per day.

If the demand of oranges were to increase by 40 cases per day at each price level then the demand curve would shift to the right i.e. increase in overall demand. This can happen due to a subsidy given by the government or removal of export duties and taxes on oranges.

If he government decides to supply a $0.5 per case subsidy to the producers of oranges then the supply curve would shift towards increasing the overall demand and supply for oranges since they are produced cheaply and hence are available at a cheaper price.

Part B

CPEoD = (% change in quantity demanded of good A/ % change in price of good B)

CPEoD = {[(2500-2000)/2000]/[(1.8-1.6/1.5]} = 1.88

The cross price elasticity of demand between cappuccino and chocolate milk is 1.88 and it can be observed that as the price of cappuccino increases the quantity demanded of chocolate milk has increased. This means that the cappuccino and chocolate milk are substitutes and that when the price of cappuccino increased people shifted to chocolate milk instead of cappuccino.

CPEoD = (% change in quantity demanded of good A/ % change in price of good B)

CPEoD = {[(900-1000)/1000]/[(1.8-1.6)/1.5]} = -0.75

The cross price elasticity of demand between cappuccino and cup caked is -0.75 and it can be observed that as the price of cappuccino increases the quantity demanded of cup cakes has decreased. This means that the cappuccino and cup cakes are compliments and that when the price of cappuccino increased people reduced their intake of cappuccino and also their intake of cup cakes which are usually taken with cappuccino.

IEoD = (% change in Quantity demanded/ % change in income)

IEoD = (0.15/0.10) = 1.5

The income elasticity of healthcare is calculated to be 1.5, this means that healthcare is a luxury good since the elasticity of healthcare is greater than 1.

Part C

When the price of pertol increases people will tend to look for smaller cars and hence the demand for small cars would decrease and would shift the demadn curve to the right.

When income of people increases people will ...