@20101.How does the principal 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 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 risingComplementary 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 of cars. There is an increase in the price of compulsory car insuranceAccording 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 quantity 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. A technological innovation reduces the cost of productionA reduction in production cost will imply an increase in the number of cars in the market. It will also imply a reduction in the price of cars due to the decrease in cost of production.
This will result in a shift in the supply curve as shown below. d) A local government imposes a green tax on car ownership (2 marks)An imposition of tax on cars will imply an increase in the price of cars and thus a reduction in the number of cars owned by the population. The quantity of cars in the market will be reduced. This will also result in a shift in supply and ultimately demand. 3. The supply of oil will never actually run out.
Why? (1 mark)Oil supply will never get depleted because oil is regenerated as fossils decompose. 4. Under a situation of rent control on units, flats and apartment who actually wins and who loses? What are the long term implications of having rent control? (2 marks)