Answer a
In economics terms, opportunity cost is defined as the value derived from the second best alternative use of a resource. In other words, it is the implicit cost involved in the decision making process of economic agents. Economic profit is computed from accounting profit by deducting opportunity cost from it.
From my personal experience, I faced a trade off in deciding the whether to buy a coke or an ice –cream. When I go with the choice of ice cream, the associated opportunity cost is the utility derived from Coke.
Answer b
i) When price of solar panel is lower than the equilibrium price, the lower price increases quality demanded following the law of demand. Law of supply suggests an increase in quantity supplied of the good with increase in price. The lower price thus reduces quantity supplied in the market. As supply falls short of demand, there exists an excess demand in the market. The figure below illustrates the market scenario
ii Electricity and solar power are substitute to each other. An increase in price of electricity price reduces demand for electricity. People then tend to increase their demand for solar power. Consequently, demand curve in the solar power market shifts outward to D2. With this, price and quantity corresponds to equilibrium increases. This below shows this with the help of relevant demand and supply.
Answer a
In the given article, the first paragraph involves application of law of demand. According to law of demand, own price of a good is inversely related with demanded quantity. The decline in Granny Smith apples’ price thus raised demand for apples by Grannie Mae from 1 to 3 kilos.
Answer b
The concept related to the change in demand is applicable for second paragraph of the give article. Change in demand indicates change in the demand resulted from change in factors that influence demand except own price. Fashion trend was followed walking frame as revealed by the fact that friends of Grannie Mae and other people, Grannie Mae’s demand increase as well. This is a change in demand as demand increases though price of walking frame remain the same.
Answer c
For third paragraph of the article economic concept of nature of good is relevant. A good is normal when its increases along with income. Goods for which demand decline with increase in income is called inferior good. Traveling here is a normal good as Grannie Mae decided to travel to her sister with increase in income or pension.
In the new apartments’ market, there is an excess supply. Demand from new buyers is less than building of new apartment. With presence of excess supply, price of new apartments declines as illustrated in the figure below
As shown in the above figure, corresponding to market price P2, demand for new apartments is give as Q1. The available supply of new apartments exceed the demand with supply being at Q2. Willingness of buyers to purchase new apartment thus is lower than sellers’ ability to build new apartments. Consequently, there is a downward pressure on market price of apartments and price falls accordingly.
Demand curve of the yoga service shifts to the right following an increase in demand. Supply curve on the other hand shifts to the left responding to a decline in service providers. As both demand and supply changes, there are three possible cases having different equilibrium outcome.
Case I
Consider first the case where change in demand is exceeds that of that change in the supply. That is the rightward move in the demand curve is more compared to the leftward shift in the supply curve. As shown in the figure below, demand curve moves from D to D1 while the supply curve moves from S to S1. As demand effect dominates, equilibrium price and quantity both increase.
Case II
It might be possible that change in magnitude of demand change equals the change in magnitude of supply. That means, inward move in the supply curve is same as the outward move in demand curve. In this case, the trade quantity of yoga service remain the same at Q1 while price increase from P1 to P2.
Case III
The third possible case is where change in supply exceeds that of demand change. In this case, supply curve shifts (S to S1) more than the demand curve (D to D1). Consequently, at the new equilibrium scenario, price increase like two previous cases. The equilibrium quantity however declines from Q1 to Q2.
Combining all the three cases, it can thus be said that yoga service price will increase certainly. The quantity traded in the market however may increase, decrease or remain the same depending on demand and supply condition.
In case of price elastic demand, a rise in price reduces revenue while a decline in price would lead to an increase in revenue. Reverse is the case in case of inelastic demand. Revenue here increases with an increase in price and decreases with a decline in prices.
This can further be understood with help of a numerical problem. Consider for example, a certain product is 2. The elasticity value indicates demand is elastic in nature. With this elasticity, a 50 percent increase in price, reduce demanded quantity by 50*2 = 100%. Change in revenue depends on the change in both price and quantity. 50 percent increase in price thus causes revenue to fall by (+50%) + (-100%) = 50 percent.
Now consider another example where demand is inelastic in nature. Suppose, elasticity is given by 0.5 percent. With this elasticity, a 50 percent increase in price, reduce demanded quantity by 50*0.5 = 25%. Change in revenue depends on the change in both price and quantity. 50 percent increase in price thus causes revenue to increase by (+50%) + (-25%) = 25 percent.
Answer b
Alcohol demand constitute a price inelastic demand. Because of addictive nature people cannot change their demand much in response to price. The set minimum price is said to be binding when the set minimum is above the equilibrium price. As demand is inelastic increase in price causes no change in demand. The entire tax burden is borne by the buyers. The incidence of taxation is illustrated in the following figure.
Answer a
A firm continues its operation as long as price is below the average total cost but still above the average variable cost. Firs shuts down as price goes below the average variable cost.
Answer b
Firm in the competitive market in longer term enjoys only normal profit as shown in the figure below
If competitive firms in the short run earns above normal profits new firms would join the industry. With the industry supply increases pulling down the prices and profit. In case of subnormal profit, firms leave the industry. This reduces supply, increases price and profit. The adjustment process continues till profit reaches to the normal.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download