Fundamentals of Economics Question 1

Fundamentalsof Economics

Question1

Price (P)

Quantity Demanded (Qd)

Total Revenue (TR)

10

1

10

9

2

18

8

3

24

7

4

28

6

5

30

5

6

30

4

7

28

3

8

24

2

9

18

1

10

10

Theprice elasticity of the demand is 1 throughout the length of thegraph. The graph has a constant gradient of 1 as shown in the graphabove.

Question2

Anincrease in the bus fare would increase its revenue. For an inelasticdemand curve a change in the price of a commodity does not affect thequantity demanded. With an increased price of commodity and no changein quantity demanded RTA is bound to have increased revenue.

price

Quantity

Asshown in the graph above a change in the price causes a very smallchange in the quantity demanded

Question3

Anincreased technological improvement in a way to surpass thewillingness and ability to purchase a laptop would imply that thedemand curve shifts to the right. A shift in the demand curve to theright would imply that the equilibrium price rises as shown in thediagram below

price

D1 D2 S

E2

E1

S D2

D1

Quantity

Ashift of the demand curve from D1D1 to D2D2 causes the equilibriumpoint to rise from point E1 to point E2.

Question4

Amarket may be a place or forum by which buyers and sellers meet totrade goods and services for other goods services or money.Equilibrium occurs in a market where the quantity demanded by thebuyers balances the quantity supplied to the market. Thecorresponding price to this point is called the equilibrium pricewhile the corresponding quantity is known as the equilibrium quantity

Atequilibrium point the quantity demanded equals quantity supplied

16-1P=-4 + 1P

20=2P

P=10

price

Quantity

Question5

Q

TC

FC

VC

AVC

ATC

MC

1

2000

1000

1000

1000

2000

8000

2

2500

1000

1500

750

1250

5000

3

2800

1000

1800

600

933.3

3733.2

4

3300

1000

2300

575

825

3300

5

4000

1000

3000

600

800

3200

6

4800

1000

3800

633.3

800

3200

7

6000

1000

5000

714.2

857.1

342804

References

Wessels,W. J. (2000). Economics.Hauppauge,NY: Barrons