Description

QUESTION 1 (CLO 1):

1. The ability to make good decisions is the key to successful managerial performance. Discuss the common elements shared by all decision-making processes. Provide a real-world example to elaborate your answer.

(4 marks)

2. Marginal analysis is one of the most useful concepts in economic decision making. Discuss and show examples including graphs to support your answer.

(4 marks)

3. Given Y = -2X² + 20X - 20

1. Find the optimal value of X
2. Is this a maximum or minimum point? Explain.

(2 marks)

 [Total: 10 marks]

PART 2

OBJECTIVE:

The main objective of this part of the assignment is to develop the students’ ability to discuss important economics concepts pertaining to supply and demand, as well as to utilise the concept of elasticity in business management.

REQUIREMENT:

QUESTION 2 (CLO 2)

1. Market equilibrium is one of the fundamental concepts in economics.
1. Describe market equilibrium using relevant graphs and discuss market surplus and market shortage. 

(5 marks)

2. Suppose the market for kittens adoption centre can be described by the following equations:

Demand equation: Q_d = 100 – 20P

Supply equation: Q_s = 130 + 2P

Calculate the equilibrium price (P) and quantity (Q) of kittens. Remember that a negative price of kittens is not allowed. How many kittens will be adopted by humans and how many will be “strays?”

(5 marks)

2. Economists have made estimates of the price elasticity of demand for a variety of goods and services. They have also estimated income elasticity and cross-price elasticity.

1. What is price elasticity and why is it important to estimate price elasticities? Provide your own examples to support your answer.

(5 marks)

2. Seiko is planning to increase the price of its watches by 10 percent in the coming year. Economic forecasters expect real disposable personal income to increase by 6 percent during the same period. From past experience, the price elasticity of demand has been estimated to be approximately -1.3 and the income elasticity has been estimated at 2.0. These elasticities are assumed to remain constant over the range of price and income changes anticipated. Seiko currently sells 2 million watches per year. Determine the forecasted demand for next year (assuming that the percentage price and income effects are independent and additive).

(5 marks)

[Total: 20 marks]

PART 3

OBJECTIVE:

The main objective of this part of the assignment is to develop the students’ ability to discuss important economics concepts pertaining to the theory of the firm, with a focus on the production function as well as to determine the stages of production.

REQUIREMENT:

QUESTION 3 (CLO2)

                                i.            Complete the following table, where X is the input for the product of output Q.

                                                                                                                                                               (3 marks)

                              ii.            Plot the (i) total product, (ii) marginal product, and (iii) average product functions. (Note: Some relationships on the following graph may not appear exactly correct because the graph plots discrete, not continuous values.  With smaller discrete intervals these problems disappear. You may want to try this.)

(3 marks)

                            iii.            Determine the boundaries of the three stages of production.

(2 marks)

                             iv.            Explain the law of diminishing marginal returns. Based on the answers above, show the occurrence of the law of diminishing marginal returns.

(2 marks)