Module Code & Module Name:

ECO0006 – Economic for Managers

Diploma Name: Diploma in International
Business (DIB)
CA1 (Individual Assignment):
Name: Reylend Steffin Yanata
SIM Identity Number: 10214556
1.
(i) Quantity of resources, the rice land can give more additional shared resources to the palm
oil. Farmer be able to produce more both of those goods. Based on the scenario as well the
sales farmer made for palm oil is much higher than rice. Indicated that farmer is more willing
to produce more palm oil.
(ii) A to B
30−20=10 rice
Opportunity cost 4 more Palm oil, farmer must give up 10 tons rice.
(iii)
Rice (Ton) Opportunity Cost Palm Oil (Barrel) Sub to Palm oil
30 +10 8 +8
20 +10 12 +4
10 +10 13 +1

As you can see base on the table above, the opportunity cost increases by 10 every point from
A to B and to C. The reason of concave shape reflects on the increasing of the opportunity
cost. The opportunity cost incurred from point A to B will be 10. They need to give up 10
rice for producing additional 4 palm oil. Same as well from A to C farmer had to give up 20
more rice which makes it 20 to produce 13 barrel of palm oil.
Generally, increase of opportunity cost is because that there’s imperfect substitution between
resources. The resources are being used in producing rice does not always suitable than the
resource that usually produce palm oil because resources are limited (Scarcity). In addition to
that’s it represents a concave shape reflect on the increasing of the opportunity cost.
(iv)

Increase land means more resources will cause PPC to shift outward on for both rice and
palm oil. The curve outward can represent there’s increase in opportunity cost. Thus, more
quantity of palm of oil can be capable to produce and more quantity of rice. It also indicated
an increase perfect possibility curve. The green cross is now attainable base on PPC2. Due to
increase in resources.

(v)

In this scenario this only affect one good which is the palm oil. These result in increase of
palm oil because there’s new technology which make it more efficient to produce more palm
oil (Biased Technology). This leads to increase in economic growth. But these factors won’t
affect the rice quantity. PPC rotates to the right.
Question 2(a)
(i)

In this scenario, the bicycle shops are quickly running out of stock. Meaning to say there is a
shortage in the market. The price which is much lower from the equilibrium price. The
quantity demand exceeds more than the quantity supplied. The shortage will indicate to the
seller they will increase the price (upward pressure) and supply more bicycle. It will be
adjusted to the equilibrium price and there will be no shortage.

(ii)

Customer Preference could be a result in the rise in price of bicycle to rise. It stated in the
report that during covid-19 outbreak, cycling is booming right now. As consumer tend to
wonder whether it benefit us for transportation etc. It found out that cycling can prevent from
spreading the virus or contacted other people especially in the public places. Which is more
secure than other transports? People will believe in these researches and made changes in
their lifestyle from uses of 4 wheels or 6 vehicles to 2 wheels. These could made demand
curve shift to the right. It shown from D1 to D2. The equilibrium price will be changed since
the demand curve shift. The price will increase, and the quantity will increase as well.
(E0 E1) (P0P1) (Q0Q1)
(iii)
 Since the price and quantity increases, the revenue will increase even more. The demand
curve shift to the right. When you calculate the new revenue (price x quantity), the area is
much bigger than previous one. (TR2>TR1)

(iv)

( 85−90 ) ( 5000 )
Price Elasticity of demand= =
( 6000−5000 ) ( 90 )
Ped=−0.27 8
|0.2 7 8|<1( inelastic)
In this scenario the bicycle is inelastic product. As the quantity demand drop very small
amount, the consumer is not very responsive to price at all. They have few or no substitute to
this good. In addition to that it’s also another alternative way to prevent public transports.
Meaning to say at this moment period the only way to prevent the virus is uses of bicycle and
is another need of consumer for travelling from one place to another. Consumer are not worry
if they pay at high prices. It only decreases small amount by 0.294 as not really a huge
change.
(800−600) (2500)
(v) Cross Price Elasticity Of Demand= ×
(5000−2500) (600)
1
(CED)=
3
1
⌊ ⌋> 0( Subtitute∈demad)
3
E -bike is a substitute for Brompton bicycle if the demand for e-bike rises when the price of
Brompton bicycle rises. Thus, E bike is a substitute for Brompton b if the cross-price
elasticity is greater than >0. They have positive relationship between these two goods. but
had less close relationship. Because it only increases by 0.333 if the price of Brompton
bicycle rises. (CED) for E-bike with respect to Brompton bicycle.

Question 3.
∆ Tp
(a) Mp=
∆Q
x−15
17=
2−1
17=x−15
32=x
Tp=32
∆ Tp
Mp=
∆Q
(74−54)
Mp=
(4−3)
Mp=2 0
(b) The firm is in short run production. There’s a fix factor in these cases which is capital. In
addition to that variable factor increases.
(c) When the marginal product at the optimum level (falls), the law of diminishing return sets
in. The law of diminishing return sets in when the firm hired the 4 worker that’s the
productivity level decreases due to fix factor(capital).
(d)
(I) Perfect Competition. Firstly, they have many buyers and sellers in perfect. A standardized
(or homogenous product) product are merely the same. Thirdly, buyers and sellers are fully
informed and have complete information about price and availability of all resources and
product.
(ii) Short−run profit=Q( AR− ATC)
¿ 20(50−35)
¿ 300( super normal profit )
(iii)
Since it’s a super normal profit, it attracts more firm to produce webcams, (as there’s no
barrier entry). Thus, an increase number of seller’s will likely to shift the supply curve to the
right side as a result the price changes. Since in perfect competition the firm is price taker
(the firm have no control over the price as they will charge from price equilibrium) they have
no choice to follow the price equilibrium and there’s a decrease in price. The decrease in
price will lead the marginal revenue to decrease as well. As a result, the price is lower by $20
that’s where the minimum average total cost (minimum point) and the marginal revenue
intersects. Firms now will be making normal profit (break-even point), they are willing to
leave the market and no entry to the market anymore. This market is now at long run
equilibrium where normal profit is made in perfect competition.
(iv) Price of the firm in long run is $30.