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2. What are the basic production factors of production and their corresponding factor incomes?
3. Briefly define opportunity cost. Illustrate with an example.
4. Sarah has an economics test tomorrow and plans to study all night. Her boyfriend, Charlie, wants her to
go with him to a movie. The opportunity cost for Sarah to go to the movie is:
a)
b)
c)
d)
5. Briefly explain what positive statement and normative statement are. Illustrate with examples.
6.
7.
State and explain the law of demand. Explain the difference between "change in quantity demanded"
and change in demand Use the demand curve to illustrate your answer.
8.
BUS700 ECONOMICS
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9.
10. Consider the following demand and supply functions for commodity X:
QD = 100 4P
QS = 6P
Where, P is the price of X in dollars.
If this market is in equilibrium, what is the price of X and how many units are produced?
11. Refer to the figure below. The graph shows an individuals demand curve for tea. At a price of two
dollars, the consumer is willing to buy five cups of tea per week. More precisely, what does this mean?
a.
b.
c.
d.
It means that marginal benefit equals marginal cost when five cups are consumed.
It means that the total cost of consuming five cups is $2.00.
It means that the marginal benefit of consuming the fifth cup is $2.00.
It means that the marginal cost of producing five cups is $2.00.
12. The worlds largest instant-noodle maker said soaring wheat prices have forced noodle prices up.
Despite the rising price, Asias middle class with their increasing incomes are eating more wheat
products as they try to diversify their diets from rice and save time with processed foods.
a) Explain the effect of soaring wheat prices on the market for noodles, other things remaining the
same.
b) Explain the effect of the middle class switching its diet from rice to noodles on the market for
noodles, other things remaining the same.
c) Explain the combined effect of soaring wheat prices and rising incomes on the equilibrium price
and quantity of noodles.
BUS700 ECONOMICS
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