INDIVIDUAL ASSIGNMENT ECO3033 Question 1 Read the case study below and answer ALL the question below. Source: The Star, August 2009 Based on the above article, answer the following questions: a. State the law of demand (1 mark) b. Give two (2) reasons why local automotive demand is expected to decline this year. (2 marks) c. Using a diagram each, explain the effect of an increase in the price of Proton MPV on the i. quanitity demanded for Proton MPV 1 INDIVIDUAL ASSIGNMENT ECO3033 ii. demand for Perodua MPV (4 marks) d. what is the relationship between Proton MPV and Perodua MPV? What would be the sign of the cross elasticity coefficient? (2 marks) e. List one (1) reason why the Malaysian automotive industry is not directly affected by the world recession? (1 mark) Total: 10 marks Question 2 Ceiling price of petrol for next year capped at RM 2.70 PUTRAJAYA: Consumers will not pay more than RM2.70 per litre for petrol next year even if global prices of crude oil escalate. Domestic Trade and Consumer Affairs Minister, Datuk Sharir Samad said the Government decided on the ceiling price during last week's Cabinet meeting. He added that the Government had also decided to continue with the floating mechanism to determine fuel prices.\" Since the present floating system works fine, we have decided to continue with it. Consumers will enjoy a 30 cent subsidy if the market price is RM1.90 per litre.\" The pump price of petrol is now RM1.80 per litre while diesel is sold at RM1.70 per litre. The retail prices of petrol and diesel have been gradually lowered from their highs of RM2.70 and RM2.58 respectively in June. Adapted from The Star, 20 December 2018 2 INDIVIDUAL ASSIGNMENT ECO3033 Based on the above article, answer the following questions: a. Explain the meaning of ceiling price and state a reason for the government to implement it on petrol. (3 marks) b. Based on the information given in the article, illustrate diagrammatically the ceiling price. c. (3 marks) Explain TWO (2) disadvantages of implementing a ceiling price on petrol. (2 marks) 3 INDIVIDUAL ASSIGNMENT ECO3033 d. How would one consider the relationship between the two goods, petrol and car? Justify your answer. (2 marks) Total: 10 marks Question 3 The following tables show the individual demand and supply schedules of strawberry in a market. Table 1: Quantity Demanded by Individual Consumers Price (RM) Quantity Demanded (Kg) Buyer A 35 31 27 23 19 15 1 2 3 4 5 6 Buyer B 35 30 25 20 15 10 Buyer C 29 26 23 20 17 14 Buyer D 16 13 12 10 8 6 Table 2: Quantity Supplied by Individual Suppliers Price (RM) 1 2 3 4 5 6 Seller L 25 26 27 28 29 30 Quantity Supplied (Kg) Seller M Seller N 15 0 20 10 25 20 30 30 35 40 40 50 a) Based on the information provided, plot the market demand and supply curves for strawberry in the graph paper. (4 marks) 4 INDIVIDUAL ASSIGNMENT ECO3033 b) State the equilibrium price and equilibrium quantity of strawberry. (1 mark) c) If the government sets the price of strawberry at RM5 per kg, what is this legal price called? Would there be a surplus or a shortage in the market as a result of the government's action, and by how much? (2 marks) d) Assuming strawberry is a normal good, explain what would happen to the equilibrium price and quantity of strawberry in the market in each of the following situation. Explain and illustrate your answer using suitable diagrams. i) MARDI found a new breed of strawberry that can grow faster, ii) There is a finding by the Health Ministry that eating strawberry can improve skin elasticity due to its high vitamin C content. (3 marks) Total: 10 marks 5 INDIVIDUAL ASSIGNMENT ECO3033 Question 4 a. The schedule below shows the demand for goods A, B and C in year 2018 and 2019. Quantity Demanded A B C Consumers Income 2018 40 25 50 3000 2019 36 30 50 3500 Year i) Calculate the income elasticity of demand for the three goods when income increases from RM 3000 to RM3500. (9 marks) Good A Good B Good C 6 INDIVIDUAL ASSIGNMENT ECO3033 ii) State the type of each good and give an example. Good Coefficient IED Type of Good (3 marks) Example A B C b. Differentiate the FOUR (4) characteristics of monopoly and oligopoly. 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