ECO 101

Assignment 2
Section 24
Tamzid Islam Sanvy
ID-1831498630

Answer to the question no. 1

a)
According to the table there aren’t any row where butter and cheese production
are the same.
Opportunity cost of butter of city Z, 8/4=2.
Opportunity cost of butter of city G, 10/2=5.
City Z has lower opportunity cost. That’s why city Z will produce butter and city G
will produce cheese.
Before specialization and trade butter, 4+2=6. Cheese, 8+10=18.
After specialization and trade butter, 8+0=8. Cheese 0+20=20.
After specialization and trade gain=2
As a result after specialization and trade both the societies will get benefitted.
Now 4 units of butter are traded for 10 units of cheese
So city Z will have, 8-4=4 butter and 10 cheese
And, city G will have, 20-10=10 cheese and 4 butter
b)
We can see city Z is facing law increasing opportunity cast. The rule of increasing
opportunity cast notes that as the output of one good increases, so does the
opportunity cost of producing another. According to the given information of city
Z graph is given below,

The benefit of the best option foregone is the opportunity cost of a decision. The
graph indicates that there is a negative relationship. And as one form of output
increases, another decreases. That is why there is a downward slopping. On the y
axis, I've put butter, and on the x axis, I've put cheese. On the x-axis, we can see
that as cheese production increases from 0 to 8, butter production falls from 8 to
4. When cheese production rises from 8 to 16 while butter production falls from 4
to 0, the situation is reversed. We can either make 8 units of butter or 16 units of
cheese on the frontier side.
So, we can say city Z is facing the law of increasing opportunity cost.

Answer to the question no. 2

The concept of opportunity cost states that the cost of one item is equal to the
cost of not doing or consuming anything else. In a nutshell, opportunity cost is the
cost of the next best option.
The financial cost of companies and economic decisions is known as opportunity
cost. In business and economics, the rule of increasing opportunity cost is
relevant because it explains the dangers of going entirely into nonproduction.
Because choices on how to better distribute scarce resources will always be
taken, there will always be opportunity costs.
Example of increasing opportunity cost are related to a business firm. A company
that manufactures wooden accessories and clay products :
They can spend half of their materials and labor on wooden production and half
on clay production, or they can spend all of their resources on wooden production
or all of their resources on clay production, or some combination of the two. Their
opportunity costs will rise as they move closer to one pole or the other. They are
totally losing out on the ability to manufacture and sell wooden accessories
despite having the materials, experience, and market share to do so.
Answer to the question no. 3
The graph given is is the market demand curve of tea in the NSU cafeteria.
Based on the law of demand,
The quantity demanded refers to the amount of a product that buyers want.
Symbol: Qd
The market price of the good is: P
Here, price of the tea fell and the quantity demanded of the good rose. In
symbols, P down then Qd up.
A demand curve is a visual representation of the relationship between product
price and quantity demanded. The graph is drawn with the price on the vertical
axis and the quantity demanded on the horizontal.
Demand is a chart that depicts the various quantities that consumers are willing
and able to buy at various prices in a given time period, assuming all other factors
remain constant. When the price falls, the quantity demanded rises. This is known
as the Demand Law. A person's normal reaction to higher prices is to consume
less of the product with the higher price. When a price changes, consumers are
enticed to eat less of the good with the higher price and more of the good with
the lower price. The nature of the demand curve for the product or service being
priced is the focus of demand-oriented pricing. The structure of the industry in
which a company competes has a significant impact on the nature of the demand
curve. That is, if a company operates in a highly competitive industry, price may
be used as a strategic advantage in gaining and retaining market share.
As a seller lowers the price demanded, the product or service may become a
more appealing use of financial resources for a greater number of buyers, thereby
extending the item's total market. “Primary demand” refers to the total market
demand for a product type from all buyers. Additionally, if rivals do not match the
lower price, a lower price may cause consumers to shift purchases away from
them.

Answer to the question No. 4

a)According to the law of demand, if all other variables remain constant (cetris
peribus), the price and quantity demand of any good or service are inversely
linked. As the price of a commodity rises, so does the market for that product.
Luxury items does not follow the law of demand.
b) The two items that are commonplace in our home are washing machine and
electric heater. Because our household income had increased, I was able to
recognize these products, which meant that demand for them had increased as
well.
c) Piggy bank and a charger light are the two products in our home that are
considered inferior. Because our household income had increased, but demand
for these two goods had decreased, I was able to identify them.
d) Ruti instead of Paratha and Laptop instead of Desktop are two examples of
replacements in our household. When our first choices were unavailable, I was
able to recognize these products by observing that these substitutes were used, if
not used, because the substitutes could fill the role of our first choices.
e) In our home, TV for electricity and water for cooking are two examples of
complements. I was able to recognize these products because they needed the
use of another product in order to be used together.
f) The element that has changed as a result of the COVID pandemic is the home
office. Working from home has grown as a result of the pandemic, and some
homebuyers may be doing so indefinitely.
g) The demand curve of eggs in my household is given below,

The graph shows the cost and quantity of purchasing eggs. The price is on the y
axis, and the number of eggs is on the x axis. When the price of an egg is 5 taka,
the quantity of eggs is 20. When the price of eggs rose to 10 taka, however, the
quantity decreased to 15. Price and quantity demand are inversely related,
according to the law of demand (ceteris paribus). As a result, as prices rise,
quantity demand decreases, and as prices decrease, quantity demand increases
(ceteris paribus).