THE COPPERBELT UNIVERSITY

DIRECTORATE OF DISTANCE EDUCATION AND OPEN LEARNING

2019 – BS 110/BSP110/BHRM 210 - Microeconomics Assignment One.

DUE DATE: 11th May 2020

1. Make short notes on the following concepts

a) The economic problem
b) Opportunity cost
c) Production Possibility Frontier (PPF)
d) Market Economy

2. Natasha can read 20 pages of economics in an hour. She can also read 50 pages of
sociology in an hour. She spends 5 hours per day studying.

a. Draw Natasha’s production possibilities frontier for reading economics and

sociology.

b. What is Natasha’s opportunity cost of reading 100 pages of sociology?

3. The university produces two commodities: research and teaching. The resources the
university uses include faculty and staff, libraries, classrooms and so on. The following
points indicate some points on the Universities PPF:

A B C D E F G
Research 900 750 600 450 300 150 0
Teaching 0 20 45 75 110 150 200

a) Does research production by the university exhibit increasing, constant or decreasing per
unit opportunity cost?

b) Graph the university’s PPF (assuming that straight line segments connect the points
specified above). Indicate which areas of the graph correspond to unattainable production
points, production points that make most effective use of the university’s resources and
points where there are unemployed resources.
c) Supposing the university is at point B but would like to alter production to point C. What
would be the per teaching unit opportunity cost of producing the extra teaching unit?
d) What will happen to the PPF if the university resources are reduced to half?

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 4. a) John spends his entire income on shoes and hats. State the equation of the budget line
and draw the budget line in each of the following situations.

i) Monthly income is K1000, the price of a pair of shoes is K8 and the price of the
hat is K10.
ii) Same condition as in (i) above except that the income has changed to K500.
iii) Same condition as in (i) above, except that the income is K2000 and the price of a
pair of shoes is K16.
iv) Same conditions as in (i) above except that the hats cost K5 each.

b) Mary’s budget line relating to hamburgers and Chips or French fries has intercepts of
20 hamburgers and 30 orders of Chips or French fries.
i) If the price of a hamburger is K3, what is Mary’s income?
ii) What is the per-order price of Chips or French fries?
iii) What is the slope of the budget line?

5. Consider the Table below representing the number of 21-inch Colour TV’s individuals
are willing to purchase in Ndola and Kitwe:

Price Quantity Demanded-Kitwe Quantity Demanded-Ndola

K350 100 75
K325 150 100
K300 200 125
K275 250 150
K250 300 175

a) Plot these data, with price (P) on the vertical axis and quantity (Q) on the horizontal axis.
Connect the points for quantity demanded in Ndola and Kitwe. Lebel the Ndola line D1
and the Kitwe line D2).

b) Find the increase in the quantity of TV units purchased in Ndola and Kitwe when the
price of TV’s is lowered from K300 to K275.
c) Find the slope of the Demand lines D1 and D2 when the price is lowered from K300 to
K275.

d) What does the difference in the slope of demand lines D1 and D2 indicate?

6. Suppose that the price of basketball tickets at your University is determined by market
forces. Currently, the demand and supply schedules are as follows:

Price Quantity Demanded Quantity Supplied

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 K4 10,000 8000
K8 8,000 8000
K12 6,000 8000
K16 4,000 8000
K20 2,000 8000

a. Draw the demand and supply curves. What is unusual about this supply curve? Why
might this be true?

b. What are the equilibrium price and quantity of tickets?

c. Your University plans to increase total enrollment next year by 5,000 students. The
additional students will have the following demand schedule

Price Quantity Demanded

K4 10,000
K8 8,000
K12 6,000
K16 4,000
K20 2,000

Now add the old demand schedule and the demand schedule for the new students to calculate the
new demand schedule for the entire University. What will be the new equilibrium price and
quantity? Draw the demand and supply curves to show the new equilibrium price and quantity.

7. The table below is a Demand and Supply Schedule for Oranges. The quantity is measured
in boxes of 48 oranges each.

Price per Box (48 per Box) Quantity Demanded Quantity Supplied (Millions
(millions of boxes per year) of boxes per year)
K6 25 125
K5 50 100
K4 75 75
K3 100 50
K2 125 25
K1 150 0

i) What is the equilibrium price and Quantities in the Orange market?

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ii) At a price of K6 per box does a surplus or shortage exist in the market? What is the
magnitude of this disequilibria condition?
iii) If the government controlled the price of oranges at K3 per box what would happen in
the orange market?
iv) Suppose that the world price of oranges is K2 per box, will there be imports into or
exports from the domestic market? Why? By how much?

b) If the equation for a market demand curve is Qd= 10-4P, and the equation for the market
supply curve is Qs= 4P, Find the equilibrium price and quantity. Verify your answer
graphically.

8. Suppose the demand and supply curves for eggs in Zambia are given by the following
equations:

Qd =100−20 p
Qs =10+40 p

Where
Qd = millions of units of eggs, Zambians would like to buy.
Qs = Millions of units of egg farms would like to sell
P = price per unit eggs.

a) What will be the quantities demanded and quantities supplied if the price per unit
was:

1. 50n
2. K1.00
3. K1.50n
4. K2.00
5. K2.50n

b) Use the information derived to find the equilibrium price and quantity.

c) Graph the resultant demand and supply curves.

9. What are indifference curves? How can you use them to determine the amounts of goods
a consumer will buy? Use a two-goods model and illustrate your answer

10. a) How is the price elasticity of supply calculated? Explain what this measures.

b) How is the price elasticity of demand calculated? Explain what this measures.