The paper "The Differences Between Diminishing Marginal Returns and Decreasing Economies of Scale" is a great example of an assignment on macro and microeconomics. 1. How does the principle of opportunity cost apply to you attending college? Let’ s say you decide to save some expenses by not buying the textbook and study guide for this unit what might be the opportunity cost of that decision? (1 mark) The choice of one item over another results in a person for going something that has a value which implies some sort of cost (Raiklin, 2000).
Opportunity cost is the worth of the alternative that is relinquished. The opportunity cost of my attending college might be a job. A job is the opportunity cost for college since I relinquished it. The opportunity cost of not buying the textbook and study guide would be more savings for me. Not buying the textbook and study guide would be the opportunity cost of having more savings. 2. For each of the following, draw a diagram that illustrates the effect on the market for cars. Indicate in each case the impact on equilibrium price and quantity: The price of petrol, a complementary product, keeps rising Complementary goods are those goods which are used together.
It, therefore, follows that In the event, the price of petrol increases the market demand for cars subsequently decreases. From the graph above it is seen that the higher the price of petrol the lower the market for cars. There is an increase in the price of compulsory car insurance According to the law of demand; when all else remains constant a fall in the price of a good implies an increase in demand for the good.
It is also noted that an increase in the price of a good implies a fall in the number of goods demanded. The aforementioned relationship leads to a downward sloping graph (Railin, 2000). A rise in the price of car insurance will imply a reduction in the number of cars in the market. This is because the cost of driving a car will be subsequently increased hence a reduction in the number of cars in the market.
Raiklin, E. (2000). Graphing and Slopes. [Online]. 40 (4) pp. 10-13 [Accessed 7th April 2010]. Available at: http://www.humboldt.edu/^economic/econ104/scarcity/
Jackson & McIver (2001). Microeconomics. McGraw-Hill.
R.N. Waud, A. Hocking & I. Ward (1996). Microeconomics. Longman.
D. McTaggart, C. Findlay & M. Parkin (2003). Microeconomics. Addison-Wesley.
G. Klein & Y.Bauman (2010). The Cartoon Introduction to Economics. Hill and Wang.