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The opportunity cost of consuming

Assignment for Microeconomics

(30 Marks)

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Given the information of a certain good (say chicken), consisting of the quantity of chicken in different prices of its supply and demand, in the Excel file attached to this assignment. The rows 3, 4, and 5 in the Excel file exhibit the quantity of chicken, the price of chicken demand, and the price of chicken supply, respectively.

Please send the soft copy of your assignment to “[email protected]” and submit a hard copy in class before 5pm on the due date (17/04/2018).

Students should insert their last two student numbers in Cell A1 in Excel to generate their own data, and then answer to the following questions:

1. Draw the demand curve using the quantity and demand data of chicken provided in rows 3 and 4 of the Excel (1 mark).

2. Draw the supply curve using the quantity and supply data of chicken provided in rows 3 and 5 of the Excel (1 mark).

3. Write the demand curve equation of chicken where Y is the dependent variable, b is the slop of demand curve, and X is the independent variable (3 marks).

4. Write the supply curve equation of chicken where Y is the dependent variable, b is the slop of demand curve, and X is the independent variable (3 marks).

5. Calculate the market equilibrium point for Chicken? Determine excess supply area on the figure and explain what the area tells us?(4 marks)

6. What is the opportunity cost of consuming additional one chicken? (2 marks)

7. What is the opportunity cost of paying additional one dollar for chicken? (2 marks)

8. If the price of beef meat goes up, what happen for the market equilibrium point, price and quantity of chicken? Explain your answer (2 marks).

9. If the IT technology is applied to nurture chickens in aviculture, what happen for the market equilibrium point, price and quantity of chicken? Explain your answer (2 marks).

10. Assume that intersection between the first quantity (cell B3 in Excel) and the first demand (cell B4 in Excel) is called point A, the second quantity (cell C3 in Excel) and the second demand (cell C4 in Excel) is called point B, the third quantity (cell D3 in Excel) and the third demand (cell D4 in Excel) is called point C, and so on. We will have 6 points from A to F. Assume that we have the same fashion for intersection between quantity and supply so that the first quantity (cell B3 in Excel) and the first supply (cell B5 in Excel) is called point I, the second quantity (cell C3 in Excel) and the second supply (cell C5 in Excel) is called point J, the third quantity (cell D3 in Excel) and the third supply (cell D5 in Excel) is called point K, and so on. We will have 6 points from I to N.

Calculate the elasticity of demand for chicken at point C when price move from point B to point C? What is the relation between changes in price and total expenditure at point C? (4 marks)

Calculate the elasticity of supply for chicken at point M when price moves from point L to point M? What is the relation between changes in price and total expenditure at point M? (2 marks)

Calculate consumer surplus? Interpret your result (2 marks)

Calculate producer surplus? Interpret your result (2 marks)

Please send the soft copy of your assignment to “[email protected]” and submit a hard copy in class before 5pm on the due date (17/04/2018).

 

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