<INDIVIDUAL ASSIGNMENT 1>

NAME : BÙI THỊ HOÀNG ANH

Subject : ECO11

QUESTION 1:
An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day and can
produce two services: mowing lawns and washing cars. In an hour, Larry can either mow one lawn or
wash one car; Moe can either mow one lawn or wash two cars; and Curly can either mow two lawns or
wash one car.

Summar : An hour  Larry : mow 01 lawn or wash 01 car

y Moe : mow 01 lawn or wash 02 cars
Curly : mow 02 lawns or wash 01 car

Answer:
a. Calculate how much of each service is produced in the following scenarios, which we
label A, B, C, and D:

 <The first scenario where : All three spend all their time mowing lawns. (A)>
In 10 hours : Larry mows 10 lawns
Moe mows 10 lawns
Curly mows 20 lawns
Total : 40 lawns mowed .
 <The second scenario where : All three workers spend all their time washing cars (B)>
In 10 hours : Larry washes 10 cars
Moe washes 20 cars
Curly washes 10 cars
Total : 40 cars washed.
 <The third scenario where : All three spend half their time on each activity. (C)>
In 5 hours : Larry mows 5 lawns, washes 5 cars
Moe mows 5 lawns, washes 10 cars
Curly mows 10 lawns, wash 5 cars
Total : mowed 20 lawns, washed 20 cars.

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  <The fourth scenario where : Larry spends half his time on each activity,while Moe only washes cars
and Curly only mows lawns (D)>
In 5 hours : Larry mows 5 lawns, washes 5 cars
Moe mows 0 lawns, washes 20 cars
Curly mows 20 lawns, wash 0 cars
Total : 25 lawns will be mowed, 25 cars will be washed

b. Graph the production possibilities frontier for this economy. Using your answers to part a,
identify points A, B, C, and D on your graph.

A B C D
Mowing lawns 40 0 20 25
Washing cars 0 40 20 25

   The production possibilities frontier is shown in the Figure above. Points A, B, and D are
on the frontier, while point C is inside the frontier

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 c. Explain why the production possibilities frontier has the shape it does

In case A, in 10 hours all three people will cut 40 lawns and 0 wash the car
 In case B, in 10 hours all three people will cut 0 lawns and wash 40 cars
 In case C, in 5 hours all three people will cut 20 lawns and wash 20 cars
 In case D, in 5 hours all three people will cut 25 lawns and wash 25 cars
So connecting all the cases we see that the production possibilities frontier passes through the points A,B,C
 Looking at the chart, we can see that the production capacity limit of this company is that in 10 hours, it
can do a maximum of 25 cars and cut 25 lawns

d. Are any of the allocations calculated in part a inefficient? Explain.

QUESTION 2:

SUPPOSE THE DEMAND CURVE AND SUPPLY CURVE FOR FPT SWEATSHIRTS
IS GIVEN BY:

Price ($) Quantity Demanded D’ Quantity Supplied S’

per year per year
10 4000
5200 400
1600
20 3200
4400 800
2000
30 2400
3600 1200
2400
40 1600
2800 1600
2800
50 800
2000 2000
3200
60 0
1200 2400
3600

a. Draw the demand and supply curves.

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 b At what price does equilibrium occur? What quantity is traded at that price? At this equilibrium, how much dollars in total is spent on FPT
sweatshirts?

 Equilibrium occur: E = $40

 Quantity that is traded at that price: Q = 1600
 Total dollars is spent on FPT sweatshirts: 1600 x 40 = $64.000

c. Suppose the price of cotton (a production input for sweatshirts) falls such that at each price, quantity supplied changes by 1200 units. Complete the
column labeled S'. Graph the new supply curve. Label it S'.

 Cơ hội thị trường

 Phù hợp với sứ mạng
 Nguồn lực/công nghệ hiện tại

d. What is the new equilibrium price? quantity? At this equilibrium, how much in total is spent dollars on FPT sweatshirts?

 Equilibrium price : PE’ = $30

 Equilibirium quantity: QE’ = 2400
 Total is spent dollars on FPT sweatshirts: 2400 x 30 = $72.000

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 e. Starting with the original demand and supply figures, suppose that the price of sweatpants ( a compliment consumption good to sweatshirts)
falls. As a result, the quantity of FPT sweatshirts demanded changes by 1200 at each price. Complete column D'. Graph the new demand
curve. Label it D'.

 The decrease in the price of sweatpants led to an increase in demand for sweatshirts by 1200 units

f. What is the new equilibrium price? quantity?. At this equilibrium, how much dollars in total is spent on FPT sweatshirts?

 Equilibrium price : PE” = $50

 Equilibrium price: QE” = 2000
 Total is spent on FPT sweatshirts : 50 x 2000 = $100.000

QUESTION 3.
1. In each of the following cases, do you think the price elasticity of supply is (i) perfectly elastic; (ii)
perfectly inelastic; (iii) elastic, but not perfectly elastic; or (iv) inelastic, but not perfectly inelastic?
Explain using a diagram.

a. An increase in demand this summer for luxury cruises leads to a huge jump in the sales price of a
cabin on the Queen Mary 2.

 Supply is perfectly inelastic: the quantity of cabins on the Queen Mary 2 is fixed. As demand increases (a rightward shift in the demand curve),
the price of a cabin on the Queen Mary 2 increases, without an increase in the quantity supplied. See the accompanying diagram.Các Lợi ích
khác

d. The price of a kilowatt of electricity is the same during periods of high electricity demand as
during periods of low electricity demand.
Supply is perfectly elastic. As demand changes (for instance, as demand increases in times of high electricity demand), price does not change but the
quantity supplied does change. See the accompanying diagram

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 c. Fewer people want to fly during February than during any other month. The airlines cancel about
10% of their flights as ticket prices fall about 20% during this month.
 <Điểm độc đáo #1>
 <Điểm độc đáo #2>
 <Điểm độc đáo #3>

KẾT LUẬN

d. Owners of vacation homes in Miami rent them out during the summer. Due to the soft economy this year, a 30%
decline in the price of a vacation rental leads more than half of homeowners to occupy their vacation homes
themselves during the summer

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