ECO103D PRINCIPLES OF MICROECONOMICS

ASSIGNMENT
NAME: EMMANUEL KWAME ANKRAH
REGD. NO: SW/ACT/AS/01/23/0001
PROGRAMME: B.ED ACCOUNTING
1. List of items
 Clothes
 Fuel
 Shoes
 Laptop
 Rice
 Children school fees
 Stuffing chairs

2. Scale of Preference
Item Priority
Fuel 1
Rice 2
Laptop 3
Children school fees 4
Clothes 5
Shoes 6
Stuffing chairs 7

3. a) Demand Schedule for Fuel

Price per liter Quantity demanded
(GH₵) No. of liters
9.00 22
20.00 18
32.00 12
40.00 9
50.00 6
 b)
Demand Schedule for Rice
Price per cup Quantity demanded
(GH₵) No. of cups
5.00 29
10.00 24
15.00 18
19.00 13
24.00 8

4. a) Demand curve for fuel

Price (GH₵)

50.00 A

40.00 B

30.00 C

20.00 D

10.00 E

0 Quantity (liters)
5 10 15 20 25

In the diagram above, we can see that when the price of fuel is GH¢50.00, quantity demanded is
6 liters and when price falls to GH¢40.00, quantity demanded increases to 9 liters. When price
further reduces to GH¢32.00, quantity demanded for liters of petrol is 12. And when price falls
to GH¢20.00 and subsequently to GH¢9.00, quantity demanded for liters of petrol increases to
18 and 22 respectively. The effect of a change in price of fuel either moving downwards from A
to E or upwards from E to A, all other things being hold constant, would show only a movement
along the same demand curve as illustrated in the above figure. We can see that a change in
quantity demanded involves a movement from one price-quantity ratio to another price-quantity
ratio on the same demand curve (for example, from A to B in the diagram). The only factor
responsible for such a change is changes in the price levels.

b) Demand curve for Rice

Price (GH₵)

25.00 A

20.00 B

15.00 C

10.00 D

5.00 E

0 Quantity (cup)
5 10 15 20 25 30

In the diagram above, we can see also see that when the price of rice is GH¢5.00, quantity
demanded is 29 cups and when price increases to GH¢10.00, quantity demanded falls to 24 cups.
When price further increases to GH¢15.00, quantity demanded for cup of rice is 18. And when
price increases to GH¢19.00 and subsequently to GH¢24.00, quantity demanded for cup of rice
falls to 13 and 8 respectively. The effect of a change in price of rice either moving upwards from
E to A or downwards from A to E, all other things being hold constant, would show only a
movement along the same demand curve as illustrated in the above figure. We can see that a
change in quantity demanded involves a movement from one price-quantity ratio to another
price-quantity ratio on the same demand curve (for example, from A to B in the diagram). Again,
the only factor responsible for such a change is changes in the price levels.

5. What will lead to a shift of the demand curve for both fuel and rice would be a change in
demand of other factors that influences demand, rather than a change in the price levels
of fuel and rice. For instance, when there is rise in income, rise in price of related
commodity, a fall in the price of a complement commodity, a change in taste in favour of
the commodity, and the expectation of future price rise or shortage, will cause either
 more or less of fuel or rice to be bought, although the price of fuel and rice have not
change. This can be shown in the diagram below.

Price `

D2
D1
D3

Px E F G

D3
D1 D2 0
Q3
Q1 Q2 Quantity
In this diagram, we can see that the demand curve has shifted from its original position at F on
and is caused by a change in one or more of the factors that determine the state of demand,
holding price constant the demand curve D1 D1 to a new point G on the new demand curve D2
D2 and point E on D3 D3.

A rise in quantity demanded (Q2) will result in a shift of the demand curve to the right as shown
by point G and the demand curve D2 D2. On the other hand, a decrease in quantity demanded
(Q3) will result in a shift of the demand curve to the left as shown by point E and demand curve
D3 D3. A change in demand represents a bodily shift of the demand curve.

6. Assume the supply of rice increases and demand decreases, there will be a state of
disequilibrium. Price will rise above the equilibrium price from P0 to P1. The quantity
that sellers would be willing to offer is more than the quantity that consumers are
prepared to take off the market. In such situation, three is excess supply (surplus). This is
shown in the diagram below.
Px surplus S
 P1

P0 E

D
Q0 Quantity

7. 1) Fall in the price of complement commodity

2) Rise in the price of a substitute