QUESTION ONE [20]

“Modern technology, enables even perishable goods to be stored for longer periods of time.”

In terms of the above statement, with the aid of suitable diagrams contained in the demand- supply model, examine how the above factor impacts the equilibrium price and quantity for consumers and suppliers.

QUESTION TWO [25] Assess how the production possibility frontier illustrates the basic economic problem of scarcity. Use a diagram to motivate your answer.

QUESTION THREE (30)

“Competitive firms respond to changes in prices of commodities such as grain, metals, sugar, cotton, coffee and dairy cattle set by organized international markets and the individual firm has no power to influence the price”.

In terms of the above statement, assume a major storm damages majority of the wheat crop in an economy, resulting in a major shortage of flour in the market. Evaluate, in terms of the above statement, and using marginal analysis as the basis for your answer, the initial and new profit maximizing position for a perfectly competitive firm. Include in your answer a discussion of the main characteristics of this market structure.

Answers to Above Questions on Economics

Answer 1: Modern technology has significant advantages, as it allows for storage of perishable goods for longer period of time. As a result of this, there is a direct impact on the equilibrium price and quantity for consumers and suppliers, as consumers benefit in terms of extended availability and its usage for longer time period, and suppliers benefit in terms of storing foods in their shelves for longer time period.

Get answers on the above questions on economics from the best economics experts of Student Life Saviour South Africa.