Assignment 1 - Fall 2021 Department of Business Administration

Assignment 1 – Fall 2021
Department of Business Administration
Subject: Introduction To Economics Submission Date/Time: Nov 25, 2021, 23.30 PM

Instructor: Farrukh Wazir Khan Marks: 10 Marks
Instructions
1. Write your answers in a Word / PDF file and upload the file before the due date on
Blackboard.
2. Write your name, registration ID and assignment number on the first page of your
Word / PDF file.
3. Assignment answer scripts can be uploaded on Blackboard any time before due date of
25th November 2021 and time 11.30 PM. Kindly, do not wait for the last hour to avoid
any unforeseen problems.
4. Submission of assignment will be considered acceptable through Blackboard ONLY.
Therefore, do not submit your document through email or any other medium.
5. Use 12 pt. font size and Times New Roman font style along with 1-inch page margins.
6. In case of graphs, if drawn by hand, ensure these are clearly labelled and image(s)
copy/pasted to the appropriate answers of assignment document.
7. Do not copy answers from the internet or other sources. Plagiarism, if any, of your
answers may be checked through Turnitin.
Page 1 of 4
Assignment - 1
Introduction To Economics Farrukh Wazir Khan
Question # 1 Mark : 1.5
Define the difference between following terms, using graphs where needed :
a. Microeconomics versus Macroeconomics

b. Price ceiling versus price floor
c. Normative statements versus positive statements
d. Supply versus quantity supplied
e. Opportunity cost versus Marginal cost
f. Income Elasticity & Cross-Price Elasticity of Demand.
Question # 2 Mark : 1
Draw a circular-flow diagram. Identify the parts of the model that correspond to the flow of
goods and services and the flow of dollars for each of the following activities :
a. Salma pays a storekeeper Rs 100 for a quart of milk.

b. Saeed earns Rs 800 per hour working at a fast-food restaurant.
c. Shan spends Rs 400 to get a haircut.
d. Saleema earns Rs 20,000 from her 10 percent ownership of Ala Industrial.
What is a production possibilities frontier? Use an example to explain the assumptions and the
economic concept. Support your answer with a graphical representation of a PPF and label
efficient and inefficient points.
Using supply-and-demand diagrams, show the effects of the following events on the market for
sweatshirts.
a. A hurricane damages the cotton crop.

b. The price of leather jackets falls.
c. All colleges require morning exercise in appropriate attire.
d. New knitting machines are invented.
Page 2 of 4
The market for pizza has the following demand and supply schedules:
Price $ 4 5 6 7 8 9
Quantity Demanded 135 104 81 68 53 39
Quantity Supplied 26 53 81 98 110 121
a. Graph the demand and supply curves. What are the market equilibrium price and quantity?
b. If the actual price in this market were above the equilibrium price, what would drive the
market toward the equilibrium?
c. If the actual price in this market were below the equilibrium price, what would drive the
market toward the equilibrium?
d. At what prices would the market have surplus or shortage of pizza? Support your answer
using the graph in (a).
Suppose that business travelers and vacationers have the following demand for airline tickets
from Lahore to Karachi :
Price Quantity Demanded (business travelers) Quantity Demanded (vacationers)
$150 2,100 tickets 1,000 tickets
200 2,000 800
250 1,900 600
300 1,800 400
a. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for
(i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations.)
b. Why might vacationers and business travelers have different elasticities?
c. Suppose that your demand schedule for pizza is as follows:

Price Quantity Demanded (income is $20,000) Quantity Demanded (income is $24,000)
$8 40 pizzas 50 pizzas
10 32 45
12 24 30
14 16 20
16 8 12
c(a). Use the midpoint method to calculate your price elasticity of demand as the price
of pizza increases from $8 to $10 if
(i) your income is $20,000 and (ii) your income is $24,000.
c(b). Calculate income elasticity of demand as income increases $20,000 to $24,000
if (i) the price is $12 and (ii) the price is $16.
Page 3 of 4
Question # 7 Mark : 2.5
A profit-maximizing firm in a competitive market is currently producing 100 units of output. It

has average revenue of $10, average total cost of $8, and fixed cost of $200.
a. Calculate
i. What is its profit?
ii. What is its marginal cost?
iii. What is its average variable cost?
iv. Is the efficient scale of the firm more than, less than, or exactly 100 units?
b. Explain (i) firm’s Short-run decision to shut-down and (ii) Long-run decision to exit or enter
markets.
c. The market for fertilizer is perfectly competitive. Firms in the market are producing output
but are currently incurring economic losses.
i. How does the price of fertilizer compare to the average total cost, the average
variable cost, and the marginal cost of producing fertilizer?
ii. Draw a two panel diagram (two graphs, side by side), illustrating the present situation
for the typical firm and for the market.
iii. Assuming there is no change in either demand or the firms’ cost curves, explain what
will happen in the long run to the price of fertilizer, marginal cost, average total cost,
the quantity supplied by each firm, and the total quantity supplied to the market.
Page 4 of 4

Assignment 1 - Fall 2021 Department of Business Administration

Uploaded by

Copyright:

Available Formats

Assignment 1 - Fall 2021 Department of Business Administration

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Assignment 1 - Fall 2021 Department of Business Administration

Uploaded by

Copyright:

Available Formats

Assignment 1 – Fall 2021

Department of Business Administration

Subject: Introduction To Economics Submission Date/Time: Nov 25, 2021, 23.30 PM

Introduction To Economics Farrukh Wazir Khan

Question # 1 Mark : 1.5

a. Microeconomics versus Macroeconomics

a. Salma pays a storekeeper Rs 100 for a quart of milk.

a. A hurricane damages the cotton crop.

c. Suppose that your demand schedule for pizza is as follows:

A profit-maximizing firm in a competitive market is currently producing 100 units of output. It

You might also like