# Essays on Production Possibility Frontier Assignment

The paper "Production Possibility Frontier" is a wonderful example of an assignment on macro and microeconomics. The new graph looks as This helps to identify the equilibrium price to be 15 and the equilibrium quantity to be 114. C. i. The demand for jewelry if household income increases look as The above graph shows an increase in demand due to an increase in income keeping the supply the same. Ii. The graph for the increase in demand due to forecasted rain is as The above graph shows an increase in demand due to an increase in the chances of rain keeping the supply the same iii.

The graph for the gym as people perceive it to be healthy The above graph shows an increase in demand due to increase health conscoiusness keeping the supply the same iv. The graph if a new car factory is opened is as A new factory increases the supply of cars keeping the demand the same. Question 2 A. i. The coefficient = Change in quantity / Change in price = {(150000 – 100000) / (150000 + 100000)} / {(600 – 900) / 600 + 900)} = (50000 / 250000) / (300 /1500) = 1 The coefficient highlights that the price elasticity of demand is 1 signifying that for a 1% change in price demand changes by 1%. ii.

The coefficient = Change in quantity / Change in price = {(120000 – 100000) / (120000 + 100000)} / {(600 – 900) / 600 + 900)} = (20000 / 220000) / (300 /1500) = 0.45 The coefficient highlights that the price elasticity of demand is 0.45 signifying that for a 1% change in price demand changes by 0.45%. iii. The coefficient = Change in quantity / Change in price = {(170000 – 100000) / (170000 + 100000)} / {(600 – 900) / 600 + 900)} = (70000 / 270000) / (300 /1500) = 1.3 The coefficient highlights that the price elasticity of demand is 1.3 signifying that for a 10% change in price demand changes by 13%. iv.

Consumers are likely to increase the demand for a product if the price falls by 50% as the elasticity is greater than 1 and is 2 which means that the demand will be twice. v. Yes it is complementary goods as the change in the price of product A increases the demand for product B vi.

Yes it is substituted goods as the change in the price of product A decreases the demand for product B B. The imposition of tax on cigarettes decreases the demand for cigarettes as seen from the graph. The demand has fallen from 10 packets to 6. Since the price of cigarette has increased by. 5 instead of 1 so the sellers bear 50% of the tax burden This has brought about a change in the burden of the tax. Collection before tax = 10 * 2 =20 Collection after tax = 6 * 2.5 = 15

References

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