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# Assignment # 1 Introduction to Economics ECO 509 ASSIGNMENT NUMBER 1 (Maximum Mark is 30 percent of the final grade) 1. What is the Difference

Assignment # 1 Introduction to Economics ECO 509 Page 1 of 3 Dr. Fayq Al Akayleh A SSIGNMENT N UMBER 1 (Maximum Mark is 30 percent of the final grade) 1. What is the Difference between: a. Microeconomics and Macroeconomics? Give an example on each b. Normative and Positive Economics? Give an example on each c. Consumer's total utility gained from consumption of a good and total expenditure on that particular good? (3 Marks) 2. The following table represents data on the demand for and supply of "orange juice" at different price levels. Price (SR per bottle) Quantity Demanded (bottles per month) Quantity Supplied (bottles per month) 1 90,000 39,000 2 82,000 42,000 3 70,000 51,000 4 55,000 55,000 5 48,000 65,000 6 40,000 68,000 7 37,000 72,000 Given these data, answer the following: a. Find out the "value" and the "name" of the gap between demand and supply at each price level. (Write the answer in a new column). b. What is the economic consequence at each price level? (Write the answer in a new column). c. Represent diagrammatically Demand curve, supply curve, the market equilibrium point, equilibrium quantity, and equilibrium price. d. In case of disequilibrium, how would the market mechanism work to restore the equilibrium in two opposite cases? (8 Marks) 3. Which of the following items is considered as a factor of production and which is considered as a raw material? In case you classify an item as a factor of
Assignment # 1 Introduction to Economics ECO 509 Page 2 of 3 Dr. Fayq Al Akayleh production, identify the type of the resource (land, labor, capital or entrepreneurship). Further, if an item is considered as a capital, identify whether this item is a human capital or a physical capital: - A computer used at Al Yamamah University for accounting system - Non-extracted crude oil - Asphalt used in road paving - The minister of Economy and Planning in Saudi Arabia - A screwdriver among the equipment of a construction firm - A training course for workers on using a new machine in a factory - Electricity supplied to run a production line in a food factory - The no. of hours that an accountant spends on preparing the financial statements of the company where s/he works. (4 Marks) 4. If the demand function for bananas is given by the following equation: Q d =54,000-6,000P, and the supply function for bananas is given by the equation: Q s = -30,000 + 10,000P. The price is measured by SR per Kg and the quantity is measured by kilogram. a. Find out the equilibrium price and equilibrium quantity of bananas. b. What is the minimum price per Kg. at or below which producer will not be ready to supply any quantity? Explain your answer. c. What is the maximum price per Kg. at or above which consumers are not ready to demand any quantity? Explain your answer. d. Price Elasticity of Demand and Price Elasticity of Supply at the equilibrium point. (6 marks) 5. Given the demand function of a monopolist: Q = 100 – P and the cost function faces him/her: C = 100 + 80 Q a. Find out: equilibrium quantity (Q*), equilibrium price (P*), total revenue ©, average revenue (AR), marginal revenue (MR), total cost ©, average total cost
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P Qd
1
2
3
4
5
6
7 Qs
90000
82000
70000
55000
48000
40000
37000 surplus
39000
42000
51000
55000
65000
68000
72000 shortage
51000
40000
19000
0
0
17000
28000
35000 8
7
6
5 surplus = supply - demand...

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