Question 1

There are two types of markets nowadays: perfect markets and imperfect markets. There are
some distinct characteristics that can be used to identify these markets. A perfectly
competitive market is one in which both customers and businesses are price-acceptors,
meaning that buyers accept the company's price. Customers in a perfectly competitive market
have complete freedom to inquire about the product's price and/or quality if they so desire.
For example, if a company lowers its price due to lower quality, buyers are aware. There are no
entry or exit barriers in a perfectly competitive market; this means that any new or existing
business can enter the market without incurring any entry or exit costs. The next characteristic
is that all of the products on that market are homogeneous; the products sold are or usually
are of first necessity; a good example of this is dairy products, which are sold to supermarkets
and are very similar or nearly identical.

The industrial sector is an excellent example of a perfectly competitive market. As I previously

stated, dairy products, as well as tubers, fruits, and other vegetables and fruits, are examples
of such products. It is simple to produce them; these products are homogeneous but distinct in
quality; there are no entry or exit barriers, so you can enter and exit the market with
confidence; and, in addition, the prices are accepted by the buyers, agriculture is regarded as a
perfectly competitive market.

Markets with perfect competition and monopolies

are diametrically opposed. A monopolist will set
production where MR = MC in order to maximise
profits. This will be at the outputs Qm and Pm. In
comparison to a competitive market, the
monopolist raises prices and lowers output. The
Red area represents Supernormal profit, and the
formula is (AR-AC) * Q; and the Blue area
represents Deadweight wellness loss, which is a
combination of loss producer and consumer
surplus.

Question 2

The law of supply and demand governs the various types of markets. The price of a good and
its quantity are related under the law of supply, which means that if the price of the product
that customers buy rises, the providers increase their supply, giving them a greater incentive.
The law of demand, on the other hand, states that all variables remain constant, but that when
the price of a product rises, the quantity of those products declines because buyers will go to
the competition, and vice versa; when the price of a product falls, the quantity demanded rises
because that product can be afforded by more people.

Let's take coffee as an example. The price of Lidl's coffee is 1.5 pounds, while the price of
private label coffee is 1.3 pounds. If Lidl lowers the price to 1.2 pounds, it will have more
buyers than the private label, resulting in higher demand and a profitable price drop.

1
 Companies will always have to find a point of
equilibrium when applying the laws of supply and
demand. When buyers are willing to pay the price of
the product to be sold, the equilibrium point is found.
Point E0, which is the equilibrium point, can be seen
on the graph. The supply line is solid, while the
demand line is blue. We can see from the E1 point that
lowering the price will increase demand and cause
them to offer less of the product. If we raise the price,
however, fewer people will apply, which means fewer
people will buy but offer more of the product.

The perfect price elasticity of demand is

the equilibrium point. It is a point of perfect
elasticity because the price is affordable and the
quantity, production, and demand for the same
product are all in sync at that point. When the
price of a product rises, it becomes an elastic price
that attracts fewer buyers because it is no longer
affordable to everyone, resulting in less
production. In the event that the price falls, it will
already be an inelastic price, attracting more
buyers and resulting in increased production.

The availability of substitute goods, whether it is a necessary good, a basic necessity, or a

luxury, such as a whim, the market situation, and the proportion of goods are the main factors
that affect price elasticity. a company's profit from those products Substitute products are
those that replace original products but perform the same function, so the greater the
elasticity, the more substitute products there are. Then there's the question of whether these
products are a necessity or a whim; if they're a whim, they'll have more elasticity because, as I
previously stated, the greater the elasticity, the lower the production quantity, so it'll be a
more luxurious good that isn't affordable to everyone. Because there is a larger quantity of
production and the price is more affordable for everyone, the elasticity of a staple good will be
greater. Another consideration is the type of market you work in, whether it is a small market,
such as selling an apple, or a large market, such as selling fruit. The elasticity of a specific
market will be higher, while the elasticity of a broad market will be lower.

Question 5

Gross domestic product (GDP) is the value of a country's market for goods and services over a
given period of time. When the GPD grows, it indicates that the country is doing well
economically because it has more income from taxes. A country's GDP is calculated by adding
all the quantities of goods and services produced over a period of time and multiplying them
by the price they cost. Another way to calculate GDP is to add the economy's purchases at a
specific time or multiply by the quantities produced during that time.

2
Inflation is defined as a loss of purchasing power, which occurs when the prices of goods and
services rise over time, usually a year. When the general price rises, the currency depreciates
in value, limiting people's purchasing power. The most widely used methods for calculating
GDP are two. The consumer price index is the first, and the GDP deflator is the second. Price
indices are used to track changes in the cost of goods and services over a set period of time.
And there's the GDP deflator, which tracks the price levels of goods and services over time. A
person earning $ 1,300 per month is a good example of this. In 2000, that person could spend
$ 300 per month on food; today, they would spend $ 500 per month on the same purchase.

Unemployed people are those who are actively looking for work. The unemployment rate is
calculated by dividing the number of people who are unemployed by the number of people
who are employed.

Balance of payments refers to a country's total monetary transactions with other countries
over a given time period. The accounts in the balance of payments are exports, imports, and
services. The trade balance, which is the net income from exports minus the payments from
imports, the factor income, which is the income from foreign investments minus the payments
made to foreign investors, and unilateral transfers are used to calculate the balance of
payments.

The covid-19 virus pandemic has had a significant impact on the world we live in; one of the
most significant effects has been on the economy, which has impacted GDP and market
inflation. Inflation is linked to unemployment in such a way that when unemployment is low, it
leads to high inflation because businesses have suffered increased losses as a result of the
pandemic, and in addition to increasing unemployment, they need to recover as quickly as
possible from these losses, causing their product prices to rise. GDP, on the other hand, is a
case in point. However, as stated in the previous paragraph, if inflation rises as a result of
unemployment, GDP falls. When GDP falls, it means there is a higher unemployment rate,
which leads to a drop in a country's economic activity. The GDP of all countries has dropped
significantly as a result of the lockdown in covid19, and many people have lost their jobs.