New Generation University

INTRODUCTORY MICROECONOMICS

Midterm Assignment

Student’s Name:

ID NO:

Answer the following questions by using your text book and any other extra publications
that can help you
This is an individual assignment
NOTE: Answer only Five questions

1. scarcity

a. What is scarcity and why does it exist?

b. Explain the link between scarcity and each of the following:
i. choice,
ii. opportunity cost,

2. Scarcity as faced by an individual

iii. Explain how individuals are constrained by their income and the prices they face?
iv. Illustrate these concepts with the use of a budget line in a two good universe
while mentioning diminshing marginal utility.

3. There are 10 workers in Thailand and each can produce either 2 computers or 30 tons of rice.
There are 20 workers in the United States and each can produce either 5 computers or 40 tons
of rice. Draw the production possibilities frontier for each country. In each case, identify the
intercepts and the slopes of the production possibilities frontier.
4. Demand
a. Define the law of demand and draw a Demand Curve labeling all the axes correctly.
 b. List the "Ceteris Paribus" variables that affect demand and illustrate a shift in a Demand
Curve.

5. Supply

a. Define the law of supply and draw a Supply Curve labeling all the axes correctly.
b. List the "Ceteris Paribus" variables that affect supply and illustrate a shift in a Supply
Curve.

6. Equilibrium

a. Draw a supply and demand curve. Label all axes and curves appropriately. Label
the equilibrium point, the equilibrium quantity, and the equilibrium price.
b. Explain what equilibrium in the market is and why there is a tendency toward it.
(In other words, if the price of something is higher or lower than the equilibrium
price, what forces (i.e., human behavior) push the price and quantity to
equilibrium.)
c. Illustrate and explain how equillibrium price and quantity change when either the
supply or demand curve shifts: 1) an increase in Demand; 2) an increase in
Supply; 3) a decrease in Demand; 4) a decrease in Supply.

7. Disequilibrium

a. Graphs
i. With the use of a graph illustrate what a shortage (excess demand) is.
ii. With the use of a graph illustrate what a surplus (excess supply)