07 Jun Question SCHOOL OF INTERNATIONAL BUSINESS
Question
SCHOOL OF INTERNATIONAL BUSINESS
BEO1105 ECONOMIC PRINCIPLES SEMESTER 2, 2011
ASSIGNMENT (20%)
QUESTION 1
Using demand and supply analysis and graph(s) explain the impact on price and quantity in the market for CD players if the price of CDs decreased by 50 per cent. In your answer explain the relationship between CDs and CD players and the adjustment process leading to the new equilibrium point.
QUESTION 2
A few years back, an outbreak of chicken flu in Hong Kong lead simultaneously to the destruction of millions of live chickens by the Hong Kong government and a sharp fall in people’s preference or taste for chicken.Using demand and supply analysis, what is the impact on price and quantity in the market for chicken? (HINT: The scenario in this question will affect both demand and supply)
QUESTION 3
Assume good A has an income elasticity of positive 4.5 and good B has an income elasticity of negative 2.5.
a) What will be the percentage changes of quantity demanded of Good A and Good B if income increased by 10 per cent
b) What type of good is Good A? What type of good is Good B? Using demand and supply analysis and graph(s), show the impact on price and quantity in the market for Good A, if income decreased by 20 per cent.
QUESTION 4
Assume both Apples and Oranges have the same price elasticity of supply but different price elasticities of demand. The price elasticity of demand for Apples is inelastic whilst the price elasticity of demand for oranges is elastic. Using demand and supply analysis and graph(s) COMPARE the impact on price, quantity and total revenue if the supply of both Apples and Oranges increased by the same amount. (HINT: Make sure when comparing the impact on price, quantity and total revenue that you draw 2 graphs representing the differences in the price elasticity of demand for Apples and Oranges).
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