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Economics Assignment

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5 views2 pages

Economics Assignment

Uploaded by

nuhamineyob6
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Ambo University

College of Business and Economics


Department of Economics
Target groups: Industrial Engineering
Type of Assignment: Group
Total Weight: 20%
Deadline: at the end of class

General Directions:
 Be in a group of three (3) students,
 Attempt all questions carefully,
 Give brief explanations for each question,
 Copying from each other is totally forbidden and will result in zero value

I. Explanation Part: Briefly explain the following questions in detail.


1. Suppose you are given a privilege to choose between Capitalism and Socialism as an economic system
to be followed in Ethiopia. Which do you choose? Support your answer with at least five justifications.
2. Briefly describe the relationship between the three economic agents on the three circular flows
3. Discuss the economic system in Ethiopia over the recent three regimes (The Contemporary Regime,
The Derg Regime and the Imperial Regime)
4. Why does the quantity of salt demanded tend to be unresponsive to changes in its price?

II. Workout Part: Show all the necessary steps for the following questions

5. Suppose that there are 125 identical individual consumers in the market for commodity X, each with a
demand function given by dx = 3-0.5Px and 25 identical producers of commodity X, each with a
supply function given by sx =2.5Px. Then,
A. Derive the market demand function and the market supply function for commodity X.
B. Compute the market equilibrium price and equilibrium quantity.
C. Tabulate the market demand schedule and the market supply schedule for commodity X.
D. indicate the equilibrium point on the same set of axes
E. show whether surplus or shortage occurs at P = 2 and P = 5
6. Consumer income rise from 16,000 Br to 20,000 Br, as a result his purchase of good ‘X’ increases from
15 to 18 units, then find I when Io = 16,000 and explain the type of the commodity?
7. Given his monthly 1000 birr Income, Mr. Ebisa purchases two goods X and Y with market price of 10
birr and 20 birr for good X and Y respectively. Then,
A. Write the equation of the budget line and draw the line
B. Determine the slope of the budget line
C. Discuss and draw the effect on the budget line if Mr. Ebisa’s income reduced by half?
D. What if his income doubles?
8. A consumer consuming two commodities X and Y has the utility function U (X,Y ) = 2XY + 4X . The
prices of the two commodities are 8 birr and 4 birr respectively. The consumer has a total income of
120 birr to be spent on the two goods.
A. Write equation of budget line
B. Find the utility maximizing quantities of good X and Y.
C. Find the MRSX,Y at equilibrium.
D. Show equilibrium point graphically.
9. Lemma is a usual customer of coffee at green cafe. If his quantity demand is a function of price of
coffee, price of tea and his income level as expressed in the following functional form
2
Q DC =2 P C −2 P C + 2 I +2 P t
Where Pc is price of coffee Pt is price of tea, and I is income of Lemma. Assuming the price of coffee
and tea are 3.00 birr and 1.50 birr respectively and his income is 200 birr; determine: -
A. Price elasticity demand of coffee,
B. Income elasticity of demand,
C. Cross elasticity demand of coffee to tea and interpret your results in all the cases

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