1 . (a) (i) Show, by means of a labelled diagram, the market demand and supply curves for games consoles e.g. Xbox, PlayStation, Nintendo DS. Identify and explain the market equilibrium position. (ii) Explain, with the aid of a separate diagram in each case, the effects which each of the following is most likely to have on the above equilibrium position: 50% reduction in the price of computer games used with the games console; Quota placed on the quantity of games consoles entering Ireland; Government introduce a 2% levy (tax) on all income earned. (b) (i) Define income elasticity of demand and price elasticity of demand. (ii) Which figure stated below is most likely to represent each of the following: Income elasticity of demand for low price cuts of meat; Income elasticity of demand for Apple iPhones; Price elasticity of demand for Petrol. - 1.6 - 0.1 + 4.3 Give reasons for your choice in each case. (c) Assume Income elasticity of demand for games consoles is + 2.5 and total sales in 2008 were 100,000 units. Calculate the expected total sales for the year if consumers' incomes are expected to fall by 8% in 2009. Show your workings. 2. (a) (i) State and explain the assumptions underlying the theory of imperfect competition. (ii) Outline the advantages imperfect competition may offer consumers. (b) Explain with the aid of a diagram in each case the conditions for a profit maximising firm to be in equilibrium under imperfect competition: (i) in the short run; (ii) in the long run. (c) "Major food retailers in the Irish market, such as Aldi, Dunnes, SuperValu and Tesco operate under conditions of Imperfect Competition". Do you agree with this statement? Give reasons for your answer, referring to major food retailers in the Irish market mentioned above.3. (a) The Short Run Average Cost (AC) of a firm is usually shown as a U-shaped curve. (i) State and explain the reason(s) for the shape of the AC curve: From point X to Y; From point Y to Z. Unit 4 Cost E MC AC Quantity (ii) Explain the relationship between the Marginal Cost (MC) and Average Cost (AC) curves as shown above. (b) "The shape of a Long Run Average Cost (LRAC) curve is determined by economies and diseconomies of scale'. (i) Explain this statement, with the aid of a clearly labelled diagram. (ii) Define Internal Economies of Scale and External Economies of Scale. (iii) State and explain two examples of each economy. (c) "The Irish government should encourage initiatives that will prevent further cost increases and in turn sustain employment in small firms'. Suggest with reasons actions the government could take to improve the competitiveness of small firms. 4. (a) "Banks may fail by over-extending their loan book". Explain this statement within the context of a bank's twin requirements of liquidity and profitability. (b) Keynes' concept of 'Liquidity Preference' is based on three reasons why people desire to hold wealth in money form. (i) State and explain each of these reasons. (ii) Discuss the effect a fall in interest rates is generally expected to have on each of these reasons. (c) Outline how the recent tightening (reduction) in the availability of credit may affect: (i) The Irish Motor Industry; (ii) Inflation; (iii) Ireland's Balance of Payments