Consider the following two products: an ‘overseas trip’ and ‘prescription medication’ (prescribed by a doctor). Which product would have a higher price elasticity of demand in absolute value? Explain your answer including identifying the determinant of elasticity. (1 mark) – Word count 60

The prescription medication has more price electricity as compared with the overseas trip. The prescription medication is a necessity and change in the price might not have any impact on prescription medication. On the other side, an overseas trip is a luxury product, and the rise in the price can result in a decrease in demand.  The primary determinant of price elasticity is that the

The overseas trip has more proposition if income spends as compare with the doctor prescription.

 Games. Which product would have a higher price elasticity of supply in absolute value? Explain your answer including identifying the determinant of elasticity. (1 mark) – Word count 60

 In this case, the hotel accommodation has more price elasticity as compared with the coffee. Because there is a situation of an Olympic game that makes people very desperate about the game and they do not bother about the prices. No matter how high the prices are the customers of hotel accommodation during the Olympic always buying the product. During the Olympic, the coffee’ sold in a café reduce the price of electricity.

  A storm in North Coast of New South Wales destroyed thousands of hectares of pineapple crops. Pineapple farmers whose crops were destroyed by the storm were much worse off, but those whose crops were not destroyed benefited from the floods. Assume that the demand curve for pineapples is inelastic. Have pineapple farmers as a group been hurt or helped by the floods? Explain using supply and demand diagrams. (2 marks) Word count 100.

 It is evident that the pineapples are the inelastic product and the increase in the prices of the Pineapples can result in the decrease in the overall demand of the product, in this case, it can be seen that the because of the storm a lot of crops of pineapples are destroyed and some of the remaining crop benefited from the flood. The pineapples crops that are also remaining not likely might increase the rates in the market for pineapple because the supply is very less, it can increase the prices and the demand will eventually decrease. So it can be said that the flood also not helps the pineapple.

 Task 3: Costs of Production

 Explain whether the following events in questions 1 and two will affect fixed costs or variable costs (make sure you justify your answer):

 The federal government applies a licence fee on every ‘television network’ of 1 million AUD. (1 mark) Word count 40

The implication of the license or by the federal government on the television channels would affect the fixed cost because the television channels have to pay 1 million AUD to get a one-time license for their television channels to run.

 Samsung signs a new contract changing the price it pays for the ‘camera lens’ that are used in its mobile phones. (1 mark) Word count 40

 The Samsung is a mobile seller in the marketing are very much affected by the economical inflation rates, so the new contract changing the price of the camera Len would be a variable cost f the Samsung and prices can be changed in the contract depending on the demands and the prices in the market.

With the use of a graph explain what is minimum efficient scale? What is likely to happen in the long run to firms that do not reach minimum efficient scale? (2 marks) Word count 100.

 In any organization, the minimum efficient scale or efficient production scale is said to be the lowermost point where the firm can produce that its long-run benefit costs are lessened. In the graph below, it is illustrated that the how the minimum efficient scale is likely to help in estimating the long-term cost of any organization.

 The minimum efficient scale is very important for the organization to function competitively and efficiently in the industry. If any of the firms does not use the minimum efficient scale than in the long run, the company might not be able to operate effective in the industry.

 What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business. (1 mark) Word count 80.

 Explicit costs for a firm are the out-of-pocket expenses—for instance, wages payments and rent, materials, the operational cost of the company like electricity bills or the salaries.

Implicit costs in the organization are said to be a resources opportunity cost that is already used in business and possessed by the firm —for instance, growing a factory onto already owned land, the training provided to employees by organizational experts or the company website is built by using developers inside the company.

 Task 4 Market Power

'Being the only seller in the market, the monopolist can choose any price and quantity it desires. It can, therefore, price its product as high as it wants.' Evaluate this statement: Is it true or false? Explain your answer using a graph.

If the statement is critically analyzed than it can be said that the statement is not entirely correct. The monopolist does not have the capability to select both quantity & price. It is true that monopolists have market power and ability to influence the market price; however, they cannot control the demand or the demand curve in the market. When the monopolist set price in the market the sold quantity is indicated through the demand curve. Therefore saying that monopolists can select any quantity & price of their desire. Another thing that is not true in the statement is regarding the high price. The monopolists cannot increase the price as high as they want. The factors such as elasticity of demand & cost of production play a vital role in determining the price (DK, 2012)

Callaway is a company that sells golf clubs. Callaway recently engaged in research and development leading to the production, and released, of a new set of clubs designed for women that provides a significant advantage to players. Explain, using a graph, how will this impact on the price, quantity and profit of Callaway in the long run if the company is a monopoly? Explain, using a graph, how this will change if many other companies start selling similar products?

In the condition of monopoly, Callaway will try its best to reduce the Marginal Cost (MC) so that the price can be enhanced. The production quantity can be reduced to achieve a reduction in MC  & ATC. In simple words, the profits of the company increased. In case of a large number of firms enter inti9 the market than the price will decline dramatically hence AC = MC. It means that a steady price level will prevail in the market. If Callaway wants to remain in the market than it is necessary to reduce the prices as well so that the perfect competition scenario can be created in the market. The corporations cannot increase the price as high as they want. The factors such as elasticity of demand & cost of production play a vital role in determining the price.

In the above figure, the demand marginal cist and average total cost curves can be seen. Through analyzing the above scenario, it can be said that prices play a crucial role in attracting the customers. If the prices are not according to the expectation of customers than the corporation might not able to meet the preferences of the customers (Arnold, Economics, 2008).

Task 5 Business Strategy & Market Power

Identify the negative externality discussed in the article? Explain, using a graph, how the negative externality leads to an inefficient price and level of output. Provide two solutions that you would recommend to the government to address the externality?

The negative externality that is explained in the article is regarding the consumption. The article shows that people are overusing transport. The optimum consumption (social) is on the Qopt with price Post. However, due to poor market output of public transportation is at Qm having the price Pm which is higher. It means that private benefit is way higher than social benefit. If all the situation is analyzed critically than it can be said that society is over consuming personal transport and welfare loss prevail in society. In the graph below the trainable is representing the welfare loss.

There are many ways through which the government can resolve this issue. The first way through which this issue can be resolved is the improvement of public transport. The government can provide better transport facilities to the public on affordable prices. When the people are going to get better public transport facilities than the private marginal benefit will shift to social marginal benefit. The government must make sure that the price of public transport remain affordable so that a maximum number of people would take benefit from public transport. Through this, the issue of overuse of private transport will decline up to a lot of extents (Barro, 2007).

Another major step that the government can take is to create awareness in the people regarding public transport. The government can launch an advertisement campaign in which it can tell the people about the benefit of public transport. The government can tell people that using private transport increases environment pollution. Through the use of public transport not only the people will contribute to reducing the pollution but can also reduce their expenses up to a lot of extents. Through awareness campaign, the perception of the p [people regarding public transport can be changed efficiently. It is evident that if the government is not going to take any initiative regarding the issue than the people keep on using the private transportation because through this, they will be able to get more benefit than public transportation.

Define Nash equilibrium

The Nash equilibrium can be explained as the system which is at a stable state and includes participants who are interacting with each other. However, no participant will able to gain individually due to the change in strategies if other strategies remain unchanged.

What is (are) the Nash equilibrium(s) in this game?

If Intel strategy is R & D then , then AMD's approach is to select R &D  3 >1.
 If Intel approach is to select R & D, then AMD's approach will become R & D  12 > 8.
Therefore main approach of AMD is to select R & D.
Correspondingly, main approach of Intel can be determined as:
If AMD approach is to select R & D, then Intel's tactic will become R & D  5 > 3.
If AMD approach is to select R & D, then Intel's tactic will become R & D  20 >15.
Therefore the leading approach of Intel is to select R & D (Arnold, Economics , 2008).

References of an ‘overseas trip’ and ‘prescription medication’ (prescribed by a doctor)

Arnold, R. A. (2008). Economics. Cengage Learning.

Arnold, R. A. (2008). Economics . Cengage Learning.

Barro, R. (2007). Macroeconomics: A Modern Approach . Cengage Learning.

DK. (2012). The Economics Book. Penguin.