1. According to Alfred Marshall, demand and supply simultaneously, determine market equilibrium price. On the one hand, marginal utility determines the maximum offer price consumers are willing to payfor each additional unit of consumption on the demand side of the market. Variable cost at the margin determines the minimum asking price producers are willing to accept for each additional unit supplied.

Using a suitable diagram, draw the Diamond-Water Paradox resolved in economies.

2. In business analysis, theproduction possibility frontier(PPF) is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite endowment of resources by one country. The PPF demonstrates that the production of one commodity may increase only if the production of the other commodity decreases in economy.

By using the Production Possibilities Frontier Curve (PPF), explain the concepts of:

i. Inefficient allocation of resources

ii. Efficient allocation of resources

iii. Unattainable point.

iv. Scarcity of resources.

3. Suppose that the demand and supply of liter of petrol are given in table 1 below:

Price (RM)	Quantity demanded (liter per day)	Quantity supplied (liter per day)
0.80	8	24
0.75	10	22
0.70	12	20
0.65	14	18
0.60	16	16
0.55	18	14

Table 1

a) What is the equilibrium price and quantity of petrol?

b) Use a graph paper to draw a demand curve and supply curve based on thetable above.

c) Now suppose that a political crisis in the Middle East lead to a decrease in the supply of petrol by 8 liter per day at every price. Show the change in the graph paper and show the new equilibrium position.

i. What is the new equilibrium price of petrol?

ii. What is the new equilibrium quantity of petrol?

d) In order t o help the consumer, the government imposes a price control of RM0.60 per liter:

i. Give the name of this price control.

ii. How much petrol will be demanded by consumer at this price?.

iii. How much petrol will be offered for sale by suppliers?

iv. How much petrol will actually be sold?

v. Calculate the excess quantity of petrol demanded.

4. The demand function for bicycles in Malaysia has been estimated to be

Q= 2,000 + 15Y - 5.5P

Where Y is income in hundred of RM, Q is the old quantity demanded in units, and P is the old price (RM) per unit. When P = RM150 and Y = RM15,000, determine the following:

i. Price elasticity of demand (_p) and interpret your finding

ii. Income elasticity of demand (_Y) and interpret your finding