Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

TAKE-HOME ESSAY 1
BT10203 MICROECONOMICS I
(TOTAL MARKS 20%)

Instruction – Please answer all the questions with your own words or fill in the
blanks.

Question 1

Please relate the current Covid-19 pandemic issues to any concept in Microeconomics. You can
answer by giving an example and discuss it thoroughly.

Price (RM)
S1

P2 E2
S0

P1 E1

P0 E0 D1

D0

Q2 Q0 Q1 Q

Face Mask

According to World Health Organization, a person can be infected when aerosols or

droplets containing the virus are inhaled or come directly into contact with the eyes, nose, or
mouth. To prevent the infection, people are advised to use face mask when going outside.
During the beginning period of this pandemic, the demand of face mask increase. By referring
to the curve, the original face mask equilibrium point is at E0 at price of P0 and quantity at Q0.
When the demand of mask increase the demand curve will shift to the right from D0 to D1 that
will create new equilibrium point at E1 where price and quantity increased to P1 and Q1
respectively. After a period of time, the shortage of supply occur due to too many requests of
mask in the country. This will cause the supply curve shift to the left from S0 to S1 that move
the equilibrium point at E2. The quantity will decrease to Q2 and the price will increase to P2.
People are worried to be infected by the Covid-19 so extensive demand of mask occur that
cause the shortage of face mask supply that make the price rise massively.

(5 Marks)

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

Question 2

Do you agree or disagree with each of the following statements? Briefly explain your answers
and illustrate each with supply and demand curves.

a. The price of coffee rises, causing the demand for sugar to decrease. Therefore, the two
goods are substitutes.

Price (RM) Price (RM)

P1
P0
P0

D1 D0
D0

Q1 Q0 Q Q
Q1 Q0

Coffee Sugar

I disagree with the statements because coffee and sugar are complementary goods
which means when the price of coffee increase, the demand of sugar decrease because
sugar usually being use with coffee. The original price for coffee and sugar is at P0 with
quantity at Q0. When the price of coffee increase to P1, the quantity of coffee will decrease
to Q1. When the demand of coffee decreases due to increase in price, the demand curve
of sugar will shift to left from D0 to D1 at the same time decrease the quantity from Qo to
Q1.

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

b. A decrease in supply causes the price of coffee to fall.

Price (RM)
S1

E1 S0
P1

P0 E0

D0

Q0 Q
Q1

Coffee

I disagree with the statement because decrease in supply of coffee will cause price
of coffee will increase. By referring to the curve, the original equilibrium point for coffee
is at E0 where the price at P0 and the quantity at Q0. When the supply decrease, the supply
curve will shift to left from S0 to S1 which create new equilibrium point at E1. This will
cause the quantity decrease to Q1 and the price increase to P1.

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

c. During 2009, incomes fell sharply due to the financial crisis of 2008-2009. This change
likely led to a decrease in the prices of both normal and inferior goods.

Price (RM) Price (RM)

S0 S0

P1
E1 P0 E0

P0 E0 P1 E1

D0 D1 D1 D0

Q Q
Q0 Q1 Q1 Q0

Inferior Goods Normal Goods

I disagree with the statement because during if the income fell, the demand of
inferior goods like used car and used clothes will increase. When we look at the inferior
goods curve, the original equilibrium point is at E0 when price is P0 and quantity is Q0.
Increase in demand will make the demand curve shift to right from D0 to D1 so, this will
create new equilibrium at E1 where the quantity will increase to Q1 and the price will
increase from P0 to P1. But I agree with the statement that said that the price of normal
goods will decrease. By referring to normal goods curve, we can see that when the
income fell the demand for normal goods will decrease from D0 to D1 that cause demand
curve shift to left. This will move equilibrium point from E0 to E1 where quantity will
decrease from Q0 to Q1 and also price will decrease from P0 to P1.

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

d. If both coffee and tea are normal goods and the price of coffee increases, it will
increase the demand for tea.

Price (RM) Price (RM)

S0 S0

P1
P1 E1
P0 E0
P0 E0
D1
D0
D0

Q0 Q1 Q Q
Q1 Q0 Q2

Tea Coffee

I agree with the statement because coffee and tea are substitute goods. The
original equilibrium point for both tea and coffee is at E0 where price at P0 and Q0. When
the price of coffee increase it will decrease the quantity demand by the customer to Q1.
If the price of coffee increase, people will choose the alternative of coffee which is tea
because it is cheaper. This will cause the demand curve of tea will shift to right from D0
to D1. When the demand increase, the price of coffee will increase accordingly to P1. That
is why when price of coffee increase, the demand of tea will increase.

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

e. If the price of lemonade decreases due to insufficient demand, and its supply decreases
at the same time, the equilibrium price will clearly rise.

Price (RM)
S1

S0

P0, P2 E2 E0

P1 E1

D0
D1

Q
Q2 Q1 Q0

Lemonade

I disagree with the statement; the equilibrium price remain same. By referring to the
graph, the original equilibrium point is E0 at the price of P0 and quantity of Q0. When
there is insufficient demand, the demand curve will shift to left from D0 to D1 which
creates new equilibrium point at E1 where the price fall to P1 and quantity fall to Q1.
Decreasing in supply will shift the supply curve to left from S0 to S1. The movement of
the supply curve will cause the equilibrium point to move to E2 where the quantity
decrease to Q2 and price increase to P2 which is same with the original price.
(10 Marks)

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

Question 3

R efer to the graph below to answ er the questions. Use the m id-point form ula.
P lease show your w orking calculation.

a. If the price of a hamburger increases from RM8 to RM10, the price elasticity of demand
equals -3.00 .

% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞

𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 =
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

1−2
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 = × 100 = − 66.67%
(1 + 2)/2

10 − 8
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 = × 100 = 22.22%
(10 + 8)/2

− 66.67%
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 = = −3.00 (𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒)
22.22%

b. If the price of a hamburger increases from RM6 to RM8, the price elasticity of demand
equals -1.40 .
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 =
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

2−3
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 = × 100 = − 4.00%
(2 + 3)/2

8−6
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 = × 100 = 28.57%
(8 + 6)/2

− 4.00%
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑐𝑐𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 = = −1.40 (𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒)
28.57%

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

c. If the price of a hamburger decreases from RM6 to RM4, the price elasticity of demand
equals -0.70 .
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 =
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

4−3
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 = × 100 = 28.57%
(4 + 3)/2

4−6
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 = × 100 = −40.00%
(4 + 6)/2

28.57%
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑐𝑐𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 = = −0.70 (𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖)
−40.00%

(3 Marks)

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 Name: MOHD ASYRAF BIN MOHD ADHAR Matric No: BB20110723 Section No: Section 1

Question 4

Fill in the blanks with the most accurate answer or underline your answer.

4.1. The owner of a local hot dog stand has estimated that if he lowers the price of hot dogs
from RM2.00 to RM1.50, he will increase sales from 400 to 500 hot dogs per day. Using
the midpoint formula, the demand for hot dogs is ___________.

A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

4.2. At a price of RM20, a store can sell 24 picture frames a day. At a price of RM18 the store
can sell 33 picture frames a day. Since total revenue ________ by the price decrease,
demand must be ________.

A) is increased; elastic
B) is increased; inelastic
C) is increased; unit elastic
D) is decreased; elastic

(2 Marks)
TOTAL 20 MARKS