Exam (elaborations)
PRINCIPLES OF MICROECONOMICS PMIC02-5, FORMATIVE ASSESSMENT – ASSIGNMENT C ANSWERS, 2024
- Course
- Institution
MILPARK EDUCATION, PRINCIPLES OF MICROECONOMICS PMIC02-5FORMATIVE ASSESSMENT – ASSIGNMENT C: ANSWERS, 2024
[Show more]
Seller
Follow
ranganaimuneri
Reviews received
Content preview
Answer compiled by Ranga (PhD economics current) Call/Whatsapp0618441387
Coly.muneri@gmail.com (
MILPARK EDUCATION
PRINCIPLES OF MICROECONOMICS PMIC02-5
FORMATIVE ASSESSMENT – ASSIGNMENT C
Question 1
1.1. According to the law of supply, there is a positive relationship between the price and the
quantity of a good supplied on the market. Thus, as price increases, the quantity supplied also
increases because producer surplus increases (suppliers are happy). As the price decreases, the
quantity supplied also decreases. This positive relationship between the price and quantity
supplied of a product is shown by an upward sloping supply curve.
1.2.
1.2.1. An increase in the price of margarine: Margarine may be a substitute to peanut butter,
therefore an increase in the price of margarine will cause consumers to switch to butter.
The diagram below show the impact on the price and quantity demanded of butter.
, Answer compiled by Ranga (PhD economics current) Call/Whatsapp
0618441387
Coly.muneri@gmail.com (
An increase in price of margarine increases the demand of butter, demand curve shifts from
D1 to D2. Supply remaining the same, the equilibrium in the butter market changes from
E1 to E2. As a result, Price increases from P1 to P2. Quantity demanded (or equilibrium
quantity) also increases from Q1 to Q2.
1.2.2. An increase in the price of bread: Bread is a compliment to butter, that is, they are jointly
demanded therefore an increase in the price of bread will cause consumers to buy less
bread. Since bread and butter are compliments, the demand for butter decreases. The
diagram below show the impact on the price and quantity demanded of butter.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller ranganaimuneri. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $17.74. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
52510 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now