ECONOMICS (ECO 415)

Assignment 1

QAMA 2 (202041)

PREPARED BY: SHERIL AIDA BINTI SULAINAN/2015727623

PREPARED FOR: Dr NURHANI BINTI HJ ABA IBRAHIM

SUBMISSION DATE: 27/11/2020

 Assignment 1

Jun 2016

Part B (1a)

According to Richard Lipsey (1990), Economics is the study of scarce resources to

satisfy unlimited human wants. So, generally economics is about how people and society
organize limited resources to produce goods and services to satisfy unlimited human wants.

The basic economic problems are:

1.What to produce and how much?

Here, we need to organize resource allocation. When there is scarcity, producing one more
good means producing less of another good. Thus, society should choose wisely among the
limited resources to satisfy their wants and to the extend of types of goods and service to
produce for the economy. For efficient usage od scarce resources without wastage is to match
types of products and its’ quantity with society’s demand.

2. How to produce?

This matter refers to the method or techniques of production. Then it will concise about who will
be producing the goods and services, what resource will be used, and which appropriate
technology will be utilize. The producer should choose the best method that can minimize the
cost. There is labour intensive method which is more labour as compared to capital or capital
intensive method with more capital as compared to labour. For example, agriculture goods can
be either labour intensive or capital intensive method.

3. For whom to produce?

The distribution of income in society determines the distribution of goods and services. People
with higher income will have more purchasing power for more quantity or higher prices. For
example, people with higher income will demand expensive car or imported car, whereas
people with lower income will demand cheaper car or national car.
Part B (1b)
Change in Quantity Supplied
Change in quantity supplied is shown by a
Movement along the same supply curve
The change in quantity supplied is caused by
the change in the price of the good itself,
ceteris paribus.
If the price of the good increases from P0 to
P2, the quantity supplied also increases from
Q0 to Q2 units. The increase in quantity
supplied is known as expansion in supply.
If the price of the good decreases from P0 to
P1, the quantity supplied also decreases from
Q0 to Q1 units. The decrease in quantity
supplied is known as contraction in supply
Reference:
Choo, T. H. (2017). Fundamentals Of Economics. Selangor, Malaysia: Oxford University
Press.
Change in Supply
Causes the entire supply curve to change,
which is involving a rightward or a leftward
shift of the supply curve.
The change in supply is caused by other
factors influencing supply, whereas the price
of the good itself remain unchanged.
There would be an increase in supply if the
supply curve shifts rightward from S0 to S2.
Price remains at P0, but quantity supplied
has increased from Q1 to Q2.
There would be a decrease in supply if the
supply curve shifts leftward from S0 to S1.
Price remains at P0, but quantity supplied
has decreased from Q0 to Q1.