MANAGERIAL ECONMICE Essay Example

1. The situation states that the supply of the product has increased but the demand has decreased which makes the equilibrium to move and will be as follows

MANAGERIAL ECONMICE

The above chart shows that demand for laptops has decreased from D1 to D2 whereas the supply has increased from S1 to S2. Since, the invent in technology is more it has resulted in the supply to be more as compared to the decrease in demand. As a result the equilibrium quantity has increased from Eq1 to Eq2 where the equilibrium price has decreased from Ep1 to Ep2 resulting in a shift in both equilibrium price and quantity.

2. Since, the income elasticity of demand is less than 1 and is positive so a increase in income would lead towards an increase in demand and is shown below as

MANAGERIAL ECONMICE 1

The above diagram shows that supply has remained the same given an increase in demand for products due to increase in income. This has resulted in the demand curve to move from D1 to D2. As a result the equilibrium price and quantity has also moved from Eq1 to Eq2 and Ep1 to Ep2 resulting in an increase in equilibrium price and equilibrium quantity.

3. The government imposing a minimum wages which has to be paid to the employees results in the following

MANAGERIAL ECONMICE 2

The above diagram shows that S1 is the supply of labour as a minimum price of 5 and D1 is the demand of labour at a minimum price of 5. This has resulted in creating a gap between demand and supply as the market is not in equilibrium. Imposing a minimum wags has resulted in people from 5 to A1 being employed and people from A1 to A2 are not employed. Imposing a minimum wages results in an increase in unemployment thereby having a negative impact on the industry

4. The table is as

Total cost

Fixed cost

Variable cost

Average variable cost

Average total cost

The marginal cost at level 5 of output is as

Marginal Cost = Change in total cost / Change in output

= 4000 – 3300 / 5 – 4

5. Income elasticity states that a increase in income would result in an increase in demand. Since, the demand for product is rising during recession when the income of people decreases it should be considered as inferior goods. The income elasticity of demand for inferior goods states that the demand for products rises when income falls. This is true in case of spam, pancake mixes, instant potatoes, rice and beans showing that the demand has increased. This also signifies and supports the fact that the demand for inferior products rises during recession and decreases during normal periods.

6. The situation states that the demand curve is inelastic which states that whatever be the price the demand will remain the same. As a result increase in the price would mean more revenue for the government as people would still look to commute despite an increase in prices. The graph would thereby look as

MANAGERIAL ECONMICE 3

Since the demand is inelastic as shown by D1 an increase in the price by the government from P1 to P2 results no change in the equilibrium quantity but the equilibrium price increases from Ep1 to Ep2. This has thereby resulted in an increase in income for the government resulting in an increase in the revenue in the tune of Ep1Ep2.