Skip to content
Solved Assignments

Market Economics: Supply, Demand, and Cost Analysis

A short-answer test on market economics, focusing on supply, demand, and cost analysis in economic systems.

Preview 2 of 2 pages

See the first 2 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    Market Economics: Supply, Demand, and Cost Analysis Short answers Test 1 1. With reference to the textbook market at your school, describe market supply and demand in both the new and used book market. The market demand for the text books at our school is the total demand for the text books by all the students at various books shops is termed as the market demand for text books. While the total quantity of text books (old and new) sold at a price by all the book shops is known as the market supply when other things remain the same. 2. In week one, men’s leather shoes sold for $69/pair. The shoe store ran a special the second week and men’s leather shoes were marked down to $59/pair. Sales rose from 116 pairs to 132 pairs. Assuming all other economic conditions were the same, what is the price elasticity for these shoes? Is demand elastic or inelastic? Explain your answer. Price Elasticity = Percentage change in the quantity demanded Percentage change in the price PE = ∆Q/Q X P/∆P Q = 116, ∆Q = 16 =132 – 116, P = $69/pair, ∆P = - $10 ($59 -- $69) PE for shoes = 16 X 69 116 X - 10 Therefore, PE = -- 0.95, which is less than 1. This means that as the price elasticity for Men’s leather shoes is less than 1 the demand for men’s shoes is less elastic or inelastic. 3. Suppose Suzanne buys potatoes and onions. The MU of the next potato is 104 utils and the MU of the next onion is 88 utils. Potatoes cost $0.44 and onions cost $0.62. She only has money to buy one of them. Which should she buy? Under the given circumstances, Suzanne would buy potatoes with the limited income she has at her disposal, because the price of potatoes is less than the marginal utility she would be getting fr o m the purchase of her additional unit of potatoes. Whereas, the MU of onion is comparatively lower than that of potatoes and the price is higher than that of the potatoes. This is so because a rational consumer tries to maximize his/her satisfaction or total utility from the given

  2. Page 2

More Economics study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.