Economics Group Assignment

Lecturer: Andrew Maredza Group 3

Due Date: 15 September 2015

Groups Members:
Mamafha F.
26530805
Group 2

Masome O. T.
26210762
Group 3

Mokaedi M.
26428040
Group 3

Motloba G. G.
26563657
Group 3
Question 1

1.1
Table 1
Price Quantity Price Elasticity Total Revenue
Demanded (Q) (R)
R1.00 500 000 1 500 000
R2.00 450 000 0,2 900 000
R3.00 400 000 0,4 1 200 000
R4.00 350 000 0,57 1 400 000
R5.00 300 000 4,42 1 500 000
R5.50 275 000 1 1 512 500
R6.00 250 000 1,2 1 500 000
R7.00 200 000 1,75 1 400 000
R8.00 150 000 2,67 1 200 000
R9.00 100 000 4,5 900 000
R10.00 50 000 19 500 000

1.2 You should increase the price of milk, and the revenue-maximising price
is R5.50

1.3

1.4 The firm can increase its revenue by;

Decreasing the price when the price elasticity is greater than one
Increase the price when the price elasticity is less than one

1.5 (Q2 Q1)/[ (Q2 + Q1) 2]

(P2 P1)/[ (P2 + P1) 2]

= 1 500 000 1 400 000)/[(1 500 000 + 1 400 000) 2

(7 6)/[(7 + 6)2]

= 0,45
Question 2

2.1
Table 2
Chocolate Total Utility (TU) Marginal Utility (MU)
1 5 5
2 10 5
3 16 6
4 20 4
5 20 0
6 20 0
7 18 -2
8 26 8

Table 3
Quantity Marginal Total Quantity Marginal Total
Of Sweets Utility Of Utility Of Of Fruits Utility Of Utility Of
Sweets Sweets Fruits Fruits
1 25 25 1 20 20
2 20 45 2 18 38
3 15 60 3 14 52
4 13 73 4 11 63
5 10 83 5 8 71
6 8 91 6 5 76
7 6 97 7 4 80
8 4 101 8 2 82

2.2 1a + 1b = 25 + 20
= 45

2a + 2b = 45 + 38
= 83

3a + 3b = 60 + 52
= 112

4a + 4b = 73 + 63
= 136

5a + 5b = 83 + 71
= 154

6a + 6b = 91 + 76
= 167
 7a + 7b = 97 + 80
= 177

8a + 8b = 101 + 82
= 183

2.3
120

100
Total Utility

80

60
Sweets
40 Fruits

20

0
0 2 4 6 8 10
Quantity

2.4
Quantity Marginal Weighted Quantity Marginal Weighted
Of Sweets Utility Of MU Of Fruits Utility Of MU
Sweets Fruits
1 25 12.5 1 20 6.67
2 20 10 2 18 6
3 15 7.5 3 14 4.67
4 13 6.5 4 11 3.67
5 10 5 5 8 2.67
6 8 4 6 5 1.67
7 6 3 7 4 1.33
8 4 2 8 2 0.67

2.5 The First combination

Question 3

3.1
TP TFC TVC TC AFC AVC AC MC
1 60 30 90 60 30 90 10
2 60 40 100 30 20 50 5
3 60 45 105 20 15 35 10
4 60 55 115 15 13.75 28.75 20
5 60 75 135 12 15 27 45
6 60 120 180 10 20 20 30

3.2
100

90

80
Calculated Averages

70

60

50 AVC

40 AC
MC
30

20

10

0
0 1 2 3 4 5 6 7
Total Product

3.3. The curve is U-shaped

Question 4

4.1 C = 85 + 0,5(Y T)
= 85 + 0,5(Y C 40 + 0,25Y)
= 85 + 0,5(Y 90 0,25Y)
= 105 + 0,375Y

Substitute C into equilibrium equation:

Y = C + I + G + NX
Y = 105 + 0,375Y + 75 + 60 + 10
= 250 + 0,375Y
Y 0,375Y = 250
0,625Y = 250
Y = 400

4.2 T = 0,25Y 40
Substitute Y into Net tax equation:
T = 0,25(400) 40
= 60

4.3 The government spends G = 60 units and the Net collection is T = 60 units,
that symbolizes that the government is making neither a deficit nor a surplus.