A.With the aid of relevant diagrams, evaluate how the following situations will affect the market equilibrium for iPods.

i.Income statistics show that income of 18-25 years old have increased by 10% over the last year.

ii.Government imposed a duty of 6% on imported IPods.

B.This question is related to supply adjustments to an increase in demand in a market selling banana.

i.Draw three separate supply curves for banana representing immediate market period, short-run and long-run. Explain why the shape of these curves are not the same at different time horizons.

ii.Suppose that there is an increase in demand for banana. Explain the impact of this on equilibrium price and equilibrium quantity in each of the time horizons. In which market period does an increase in demand impose greatest impact on price? Graphical illustration is required.

C.Sukabuku.my is an online book store specialising in selling non-fiction books. All books sold by Sukabuku.my are priced at RM25.00 per unit. The company is currently planning for a New Year promotion of a RM5.00 discount on all books. Based on the research done by its marketing unit, online customers of the company can generally be categorised into three groups: students, working adults and retirees. The estimated impact of the proposed RM5.00 discount on the quantity demanded for each of the three groups of customers are shown in the table below.

Price of Books (RM)

Quantity Demanded

(Students)

Quantity Demanded

(Working Adults)

Quantity Demanded

(Retirees)

25.00

550

650

135

20.00

850

725

180

iii.Using the total revenue test, identify whether the demand is elastic or inelastic for each of the three categories of Sukabuku.my customers. Justify your answer by explaining the relationship between price elasticity of demand and total revenue.

iv.If Sukabuku.my can identify the category of its online customers and decide whether to give the RM5.00 discount or not, which group of customers that it should give the discount and which group of customers that it should not give the discount in order to increase its total revenue?