Assignment 1 Questions: Week 2 to Week 3: – [15 Marks]
- Water is necessary for life. Is the marginal benefit of a glass of water large or small? Give an example of some action from your real life that has both a monetary and non monetary opportunity cost. (3 Mark)
- What does the “invisible hand” of the marketplace do? Explain the two main reasons of market failure and give an example of each. (3 Marks)
- How does a price ceiling set below the equilibrium level affect quantity demanded and quantity supplied? (3 Marks)
- What would be the impact of imposing a price floor below the equilibrium price? If a price floor benefits producer, why does a price floor reduce social surplus? (3 Marks)
- Illustrates the market for Pizza has the following demand and supply
schedules: (3 Marks)
Price | Quantity Demanded | Quantity Supplied |
$3 | 115 | 37 |
$4 | 95 | 55 |
$5 | 80 | 80 |
$6 | 67 | 95 |
$7 | 50 | 110 |
$8 | 38 | 122 |
- Graph the demand and supply curves. What is the equilibrium price and quantity in this market?
- If the actual price in this market were above the equilibrium price, what would
drive the market toward the equilibrium?
- If the actual price in this market were below the equilibrium price, what would
drive the market toward the equilibrium?