ECS2601 Assignment 1 (QUALITY ANSWERS) Semester 1 2025

This document contains workings, explanations and solutions to the ECS2601 Assignment 1 (QUALITY ANSWERS) Semester 1 2025. For assistance whats-app us on 0.6.8..8.1.2..0.9.3.4... Question 1: (15 marks) 1.1 In microeconomics we need to make certain assumptions about the preferences of consumers. Use real life examples to explain any two of these assumptions. (4) 1.2 Critically evaluate why the marginal rate of substitution between two goods must equal the ratio of the price of the goods, for the consumer to achieve maximum satisfaction. (3) 1.3 Comment on any two of the following topics related to elasticities: (4) (a) Arc elasticity of demand (b) Cross price elasticity of demand (c) Infinite elastic demand (d) Price elasticity of supply 1.4 Discuss the likely shape the indifference curves related to the following items will have (makes sure to also include a graph in your explanation): (4) (a)Printers and ink cartridges (b)A box of chicken wings bought at different take away stores (you may choose which stores! You can also assume that they include the same number of wings) Question 2: (13 marks) 2.1 The table below contains information about the market for certain electronic components. Price (Euros) Units Demanded (Thousands) Units Supplied (Thousands) 3 14 2 6 12 4 9 10 6 12 8 8 15 6 10 18 4 12 (5) (a)Evaluate the impact of a price ceiling of €10,50 being introduced.(b)Determined the elasticity of demand given an increase in the price from €12 to €15. Make use of the arc elasticity formula and comment on your results.(3) 2.2 Sarah spends her wages on only two goods namely brown bread and hot chocolate. Suppose that government decides to increase the Value-Added Tax (VAT) rate by 13.3%. However, the adjustment on certain staple goods, including brown bread, is zero rated. Illustrate and discuss Sarah’s optimal consumption bundle before and after the VAT adjustment. (5) Question 3: (15 marks) A newly established wildlife reserve in Namibia is trying to determine the price it should charge for day visitor tickets. Based on data from their tourism board the management decides to distinguish between foreign and local visitors. The following provides the estimated demand curves for foreign (QF) and local (QL) visitors: