SBS MBA Managerial Economics Assignment

Question 1:

Answer the following:

  1. Discuss briefly the supply schedule and the various factors affecting the supply in the market.
  2. Assume the demand being perfectly inelastic, and supply suddenly doubles due to innovative technique of production. Illustrate in a well labelled graph, the changes in the equilibrium price, and quantity, and also is it advisable to do so from supplier point of view.

Question 2:

Explain the different degrees of elasticity with appropriate formulae.  Also, explain the point elasticity method using different examples of elastic & inelastic goods.

Question 3:

Demand of a product is usually very sensitive to economic variables, such as the prices and consumer income. This responsiveness of demand is elasticity. Compute elasticity in the below scenarios:

  1. Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie’s demand for envelopes elastic or inelastic? What is Julie’s elasticity of demand?
  2. Katherine advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more. She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that the elasticity of demand is constant, how many would she sell if the price were $10 a dozen?

 Question 4:

A survey indicated that chocolate is Americans’ favorite ice cream flavor. For each of the following, indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of chocolate ice cream.

  1. The discovery of cheaper synthetic vanilla flavoring lowers the cost of vanilla ice cream.
  2. A severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream.

 Question 5:

Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity of each of the following events.

  1. The market for newspapers in your town

Case 1: The salaries of journalists go up.

Case 2: There is a big news event in your town, which is reported in the newspapers.

  1. The market for St. Louis Rams (a professional football team) cotton T-shirts

Case 1: The Rams win the Super Bowl competition.

Case 2: The price of cotton increases.

  1. The market for bagels

 Case 1: People realize how fattening bagels are.

 Case 2: People have less time to make themselves a cooked breakfast.

  1. The market for the Krugman and Wells economics textbook

Case 1: Your professor makes it required reading for all of his or her students.

Case 2: Printing costs for textbooks are lowered by the use of synthetic paper.