Question

Week 6 includes four (4) applications in major areas in Microeconomics: 1) Scarcity/Incentives; 2) Opportunity Costs; 3) Supply and Demand; and 4) Market Equilibrium. You must complete all four applications. The options for each application are :

APPLICATION 1 - SCARCITY/INCENTIVES:

Prior to completing the application, it is highly recommended that students review Chapters 1 and 2 to gain a solid foundation.

OPTION 1: “INCENTIVES TO BUY HYBRID VEHICLES” OPTION 2: “THE ECONOMIC SOLUTION TO SPAM”

APPLICATION 2: OPPORTUNITY COSTS:

Prior to completing the application, it is highly recommended that students review Chapters 1 and 2 to gain a solid foundation.

OPTION 1: DON’T FORGET THE COSTS OF TIME AND INVESTED FUNDS OPTION 2: HOW FAST TO SAIL?

APPLICATION 3: Law of SUPPLY AND DEMAND:

Prior to completing the application, it is highly recommended that students review Chapter 3 to gain a solid foundation.

OPTION 1: LAW OF DEMAND AND CIGARETTES OPTION 2: LAW OF SUPPLY AND WOOLYMPICS

APPLICATION 4: Market Analysis (Equilibrium)

Students will select one of the Options listed for each of the applications and will complete a draft essay for each of the applications.

Please answer copy and paste

Answer 1

Scarcity is the lack of available resources to satisfy the unlimited options available in the market. There are limited resources in the market and unlimited options to choose from. This is called as Scarcity.

As there is Scarcity of petrol reserves in the market, due to which there is a rise in price of the same. As a result automobile companies have come with an option of hybrid cars which run on petrol and electricity.

Scarcity of Resources have given rise to Opportunity Cost. Opportunity Cost is the benefit foregone by not choosing the second best alternative. If an MBA graduate who is capable of earning a salary of 50000 Rs, joins his paternal business he is sacrificing a salary of 50000 Rs, which is his opportunity cost.

Law of Demand says that keeping all the factors constant, as the price of the commodity increases, the quantity demanded decreases and vice versa. Law of supply says that as the price of the commodity increases, the supply of the commodity also increases, and vice versa.

Cigarettes is an addictive item and people cannot change it. Thus for such addictive items, law of demand does not hold good. Inspite of increase in price, there is no change in quantity demanded.

The point where the quantity demanded exactly meets the quantity supplied is the equillibrium point.