College of Administrative and Financial Sciences

Assignment 1
Microeconomics (ECON101)
Deadline for students: (3/10/2022@ 23:59)

Course Name: Microeconomics Student’s Name:

Course Code: ECON101 Student’s ID Number:

Semester: 1 CRN:
Academic Year: 2022-23 SEM-1

For Instructor’s Use only

Instructor’s Name:
Students’ Grade: /10 Level of Marks: High/Middle/Low

Instructions – PLEASE READ THEM CAREFULLY

 This assignment is an individual assignment.
 The Assignment must be submitted only in WORD format via the allocated
folder.
 Assignments submitted through email will not be accepted.
 Students are advised to make their work clear and well presented. This also
includes filling in your information on the cover page.
 Students must mention question numbers clearly in their answers.
 Late submitted assignments will NOT be entertained.
 Avoid plagiarism; the work should be in your own words; copying from
students or other resources without proper referencing will result in ZERO
marks. No exceptions.
  All answered must be typed using Times New Roman (size 12, double-
spaced) font. No pictures containing text will be accepted and will be
considered plagiarism).

Submissions without this cover page will NOT be accepted. (Don’t change the
cover page format.)

Assignment Questions: (Total Marks: 10)

Q1. In Riyadh City Road traffic congestion is increasing day by day. As an economist how
you see this problem? Suggest and explain an economist’s solution to this problem. (3 Marks)
Q2. What is opportunity cost? Draw a Production Possibility curve for a country producing
two goods and show with help of an example, how principle of opportunity is applied in
explaining the changes in production possibilities for the country. (3 marks)
Q3. What is market equilibrium? Take an example of pizza (assume its price and quantity
demanded) and analyse graphically, what happens to the equilibrium price and quantity
when, (a) there is increase in demand and (b) there is increase in supply. (4 Marks)
Assignment Questions: (Total Marks: 10)

Q1. Traffic congestion, which is worsening by the day, is a major issue that will eventually

lead to a slew of issues, as traffic congestion causes harm to many parties. In addition to the

need to strengthen the transportation system, establish particular sites for parking bicycles

and improve their facilities, and expand parking spaces and impose fines on all cars parked in

businesses.

Q2. The amount that people lose when choosing between two or more options is called as

opportunity cost. The opportunity cost refers to the amount you spend when you choose

between two or more alternatives. You consider that making the choice will benefit you with

in long run, regardless of what you stand to lose. Any transaction you conduct may result

either in instant losses or future earnings due to opportunity cost.

GOOD A (in thousand )

30
B
25
20
15
10
5
C
0 GOOD B (in thousand )
5 10 15 20 25
Assume that a country manufactures 15,000 units for good B & 25,000 pieces of good A.

That is point B just on graph. If it wants to produce much more product A, this must produce

so little of product B. Point C just on graph shows if it produces 25,000 in product B, it

generates 0 for product A.

By describing this trade-off, the curve highlights the concept of opportunity cost. Producing

more of one thing precludes society of the ability to produce much of the other.

The opportunity cost is the next best option, which requires making a tradeoff in exchange for

just another GOODS option. Using the information provided, the nation was capable of

developing the GOOD A and B. When the country moves from point C to point B, some

amount of product B should be reduced.

Q3A market scenario in which the supply curve equals the demand curve is known as market

equilibrium. When supply and demand in the market are equal, an equilibrium price is the

price of a service or commodity. If a market is at equilibrium, the price will not move until an

external reason alters supply or demand, disrupting the equilibrium.

Quantity Demanded Price Quantity Supplied

2 5 18

5 4 15

8 3 8

12 2 2

17 1 1

At such a price of $3, the market is in a stable state.

The best amount is eight pieces of pizza. Whenever the

price is more than $3, the amount offered is more than

what is being asked for. At that price, firms can't sell

anything they want. There is more supply than

demand, which drives prices down. If a price is below

equilibrium, there is really too much demand, and the fact that there aren't enough goods to

go around makes the price go up. Only when the price is at "equilibrium" does there not seem

to be any pressure to go up or down..

If the demand for a product goes up, it means that

individuals desire to purchase more of it at any

cost than they can do before. The demand curve

moves to the right in a clear way. An equilibrium

price goes up when demand goes up, and so does

the amount that is sold and bought. It's important

to keep in mind that an increase in demand

doesn't seem to affect the supply curve at all.

Firms do increase output, but they only do so

when market prices go up..

 A reduce in demand, On the other hand, people

want to buy less of this good or service at all prices

than they did before. The curve for demand moves

to the left. Both the price and the amount in

equilibrium go down. Again, moving the demand

curve doesn't change how the supply curve moves.

Producers say that all that has happened is that the

market price has fallen. Because of this, companies

cut the amount they offer. The supply curve is

always the same. Along the supply curve, there is a change.