ECON649_ECON991 Workshop 1 Solutions.docx

ECON649_ECON991 Workshop 1 Solutions.docx - ECON649/ECON991...

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ECON649/ECON991 Workshop 1 Solutions Department of Economics
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MACQUARIE UNIVERSITY FACULTY OF BUSINESS AND ECONOMICS ECON649 /ECON991 Workshop No. 1 – HELD IN WEEK 5 DURING USUAL LECTURE TIME Introduction, Demand and Supply Analysis and Elasticity of Demand 1. Frost et al., Ch1, Questions and Problems, Q2, p 23. Answer: Your friend is incorrect, as there are opportunity costs associated with going to the free movie. For example, rather than going to the free movie, you could have been studying for the upcoming exam or spending quality time with your family. In other words, whenever you are making a trade-off, the opportunity cost is always the value of the next best forgone alternative. 2. Frost et al., Ch 3, Questions and Problems, Q5, p 87. a. The increase in consumers’ incomes shifts the demand curve for housing to the right. b. A major carrier going out of business shifts the supply curve for air travel to the left. c. A fall in the price of broadband shifts the demand curve for computers to the right.
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