Question 1 a. Explain whether each of the following is an example of a macroeconomic or a microeconomic problem: i. Tesla is interested in decreasing the production of its Model X vehicle based on projected revenue. ii. Government officials in St. Lucia are contemplating the implementation of a higher income tax to finance the budget. iii. The Central Bank of Trinidad and Tobago announced an increase in their policy rate in the fight against rising inflation. iv. Jeff Bezos ranks in the top 10 of the world’s richest individuals with a net worth of US$126.5 billion. b. Explain whether the following statements describes a change in demand or a change in quantity demanded, and specify whether each change represents an increase or a decrease. i. Following a clearance sale (30% reduction in prices), Hilo Supermarket sees a 60% increase in sales. ii. An increase in the price of washing machines at Singer Appliance Traders, resulted in a reduction in the sales of dryers. iii. Following reports of an incoming Category four hurricane, there was a stockpiling of bottled water by consumers. iv. Ian decides to cancel his honeymoon to Bali following reports that he would be demoted at his workplace. Question 2 a. Illustrate the impact on equilibrium price and quantity of the following: i. Market for laptops There has been increased access to wireless technology and laptops have a lighter weight. Laptops have also become easier and cheaper to produce as new technology has come online. ii. Market for pork Doctors warn that consumption of pork may lead to high cholesterol coupled with an increase in the price of pig feed. iii. Market for office spaces During the Covid 19 pandemic, there was an increase in the number of persons who worked from home. iv. Market for Alumina The government has decided to offer subsidies to local alumina producers to assist as they compete against foreigners. b. The equilibrium price of printers saw a large decrease in the past year, however the equilibrium quantity remained unchanged. Three individuals provided an explanation for the situation. Which explanation(s) could be correct? Explain. • Alex: Demand increased, but supply was totally inelastic. • Lance: Supply increased, but so did demand. • Ricardo: Supply decreased, but demand was totally inelastic Question 3 a. The demand for pancakes is given by Qd = 40 – 5P and the supply is given by Qs = 10P – 20, where P = price What is the equilibrium price and equilibrium quantity? b. The price for iPhones in Barbados has increased significantly. Demand for the cellular device has also increased. This is contrary to the law of demand. Do you agree or disagree? Explain your answer. c. Identify the flaw in this analysis: “If more Jamaicans become vegetarians, the demand for beef will fall. The decrease in the demand for beef will cause the price of beef to fall. The lower price, however, will then increase the demand. In the new equilibrium, Jamaicans might end up consuming more beef than they did initially.
Question 1
a. Explain whether each of the following is an example of a
microeconomic problem:
i. Tesla is interested in decreasing the production of its Model X vehicle
based on projected revenue.
ii. Government officials in St. Lucia are contemplating the implementation
of a higher income tax to finance the budget.
iii. The Central Bank of Trinidad and Tobago announced an increase in their
policy rate in the fight against rising inflation.
iv. Jeff Bezos ranks in the top 10 of the world’s richest individuals with a
net worth of US$126.5 billion.
b. Explain whether the following statements describes a change in
change in quantity demanded, and specify whether each change represents an
increase or a decrease.
i. Following a clearance sale (30% reduction in prices), Hilo Supermarket
sees a 60% increase in sales.
ii. An increase in the price of washing machines at Singer Appliance
Traders, resulted in a reduction in the sales of dryers.
iii. Following reports of an incoming Category four hurricane, there was a
stockpiling of bottled water by consumers.
iv. Ian decides to cancel his honeymoon to Bali following reports that he
would be demoted at his workplace.
Question 2
a. Illustrate the impact on
i. Market for laptops
There has been increased access to wireless technology and laptops have
a lighter weight. Laptops have also become easier and cheaper to
produce as new technology has come online.
ii. Market for pork
Doctors warn that consumption of pork may lead to high cholesterol
coupled with an increase in the price of pig feed.
iii. Market for office spaces
During the Covid 19 pandemic, there was an increase in the number of
persons who worked from home.
iv. Market for Alumina
The government has decided to offer subsidies to local alumina
producers to assist as they compete against foreigners.
b. The equilibrium price of printers saw a large decrease in the past year, however
the
explanation for the situation. Which explanation(s) could be correct? Explain.
• Alex:
• Lance: Supply increased, but so did demand.
• Ricardo: Supply decreased, but demand was totally inelastic
Question 3
a. The demand for pancakes is given by Qd = 40 – 5P and the supply is given by
Qs = 10P – 20, where P = price What is the equilibrium price and equilibrium
quantity?
b. The price for iPhones in Barbados has increased significantly. Demand for the
cellular device has also increased. This is contrary to the
you agree or disagree? Explain your answer.
c. Identify the flaw in this analysis: “If more Jamaicans become vegetarians, the
demand for beef will fall. The decrease in the demand for beef will cause the
price of beef to fall. The lower price, however, will then increase the demand.
In the new equilibrium, Jamaicans might end up consuming more beef than
they did initially.
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