Economics Assignment

Economics Assignment
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Economics Assignment
Chapter 4: pg. 86. Essentials of Economics /Seventh Edition1. Competitive markets are markets characterized by the presence of many buyers and sellers such that each has a negligible influence on the price of goods and services being offered. A monopoly is an example of a market structure that is not perfect as the sellers dictate the cost of their products and services.
2. A demand schedule is a table used to present the relationship between the price of goods and service, and the quantity demanded. On the other hand, the demand curve is a graphical representation of the amount required versus their costs. The demand curve slopes downwards as when the prices of goods are low; more quantities are demanded by the consumer.
3. A change in taste causes a shift in demand curve while a change in price results in a movement along the demand curve.
4. Spinach is an inferior commodity and an increase in the quantity demanded will result in a shift in demand curve to the right.
5. A supply schedule is a table that shows the relationship between the price of goods and service, and the quantity supplied while the supply curve is a graphical representation of the amount supplied versus their prices. The supply curve slopes upwards as high prices attract more suppliers into the market.
6. A change in producers’ technology results in a shift in supply curve while a change in price causes a movement along the curve.

7. The equilibrium of a market arises when the quantity of goods supplied in the market is equal to the quantity demanded. A market is pushed towards its equality by a shortage and a surplus in quantity of goods involved.
8. When the price of compliments is increased, the demand for the products decreases (Carbaugh 2007). Thus an increase in the price of the beer results in a decrease in a decrease in demand of pizza. In the long run, the quantity and prices of pizza supplied would fall resulting in a leftward shift in demand curve
9. Prices determine the market equilibrium and also signal a shortage or surplus in quantity supplied or demanded.
Chapter 6: pg. 129. Essentials of Economics /Seventh Edition
1. Example of a price floor is the minimum wage set by the government while an example of the price ceiling is the maximum rent that landlords are given by the government to charge tenants.
2. A price ceiling is more likely to cause shortages as the maximum price set by the government may not be favorable to them thus they supply less of the commodity resulting in shortages.
3. When the cost of the goods is not allowed to create market equilibrium, buyers allocate resources through negotiations, and bid and ask prices.
4. Economists oppose the price controls as they distort the normal allocation of resources (Hugh n.d). By altering the demand and supply laws, the price controls disregard the decisions made by suppliers and consumers.
5. The removal of tax paid by the consumer and replacing it with a tax paid by seller or supply does not affect the price paid by the consumer. It does not also affect the amount received by the sellers or the volume of goods sold.
6. When a commodity is taxed, a price wedge is placed between the buyer and the seller (Mankiw 2009). Buyers bear the cost by paying more for the same commodities while sellers receive less. The quantity of sales also decreases.
7. A tax imposed on goods is shared by the seller and the buyer in different proportions depending on the demand and supply elasticity. The less elastic side of the market bears the most substantial portion of the tax burden as it does not respond quickly by changing the quantity demanded or supplied.
References
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Carbaugh, R. J. (2007). An applications approach to contemporary economics. Mason, Ohio, U.S.A: Thomson/South-Western.
Hugh Rockoff (n.d). The Concise Encyclopedia of Economic: Price Controls. Library Economics Liberty. Retrieved (February 21, 2018) http://www.econlib.org/library/Enc/PriceControls.htmlMankiw, N. G. (2009). Principles of macroeconomics. 5th ed.Top of Form
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