#1

Each of the following situations requires some trade-offs. You are supposed to analyze and discuss a few trade-offs with respect to each of the given situation.

a.A Parliamentarian has to make a decision whether to spend on welfare of poor people during a COVID-19 pandemic.

b.President of Elko Pharma Karachi wants to make a decision whether to start a new factory.

c.Federal government of Pakistan wants to decide how much to spend on national defense during 2020-2010.

d.A student in Karachi who's recently finished his BS in Computer Science wants to decide whether to start his MS in Computer Science.

e.A lower income family wants to decide whether to buy a new car.

# 2

a.The recent statement given in October 2020 by French President undermined the sentiments of the Muslims all around the world. The Muslims of Pakistan decided to record their protest by boycotting French products. A recent survey shows that the shunning of French products has bought about 35 percent decrease in the sales within a month. Suppose, in September 2020, the market for Garnier hair color a French product was at equilibrium with an equilibrium price 1050 and equilibrium quantity of 12,000 in Pakistan. Analyze the impact of a boycott on the demand of Garnier hair color for the month of October 2020 in Pakistan and illustrate it graphically. Also, explain why or why not the demand has changed?

b.Consider a market for Tea a normal good in Karachi. You are supposed to analyze and discuss the effect on the equilibrium output and the price in the Tea market in Karachi for the October, 2020 after the following changes (Other things held constant).In each case, explain your answer using supply and demand diagram.

i.There has been a decrease in people's income and a rise in the price of sugar (an input for making Tea) in Pakistan during 2020 due to COVID-19 crisis simultaneously.

ii.Price of the coffee falls in the month of October 2020 in Karachi.

# 3

a.Explain why price elasticity of demand is important for firms to consider when setting their prices to ensure that they maximize their profits.

b.Inayah needs Rs.100, 000 to start an ice-cream business. If she uses Rs.40, 000 from her savings and another Rs.60, 000 borrows from the bank. The interest rate is 5% in the market. Find the opportunity cost that Inayah has to bear in order to start a business?