PLEASE ANSWER ALL QUESTIONS

QUESTION 1 - [30 marks] CLO 2

ABC Ltd enlisted the services of a market research firm to get information to assess the impact on their company of changes in critical market demand and supply conditions.

This market research company determined that the following equations appropriately described the demand and supply conditions for their product.

Qd= 4000-60p

Qs= 2,000 + 40p

Where Qd is quantity demanded; Qs is quantity supplied; and p is price

Required:

(a)Determine the equilibrium price and quantity[6 marks]

(b)Calculate the revenue at the equilibrium level of price and quantity.[2 marks]

(c)How is the market impacted when price is $25?[3 marks]

(d)How is the market impacted when price is $18?[3 marks]

(e)Calculate the price at which a market shortage of 100 units will occur.[5 marks]

(f)At what price level will there be a market surplus of 50 units?[5 marks]

(g)Tom sells "sugar buns" at $100 each. Mary sells "sugar loafs" at

$95 each. Due to the COVID19 pandemic raw material prices have

risen. Tom decides to increase the price of his "sugar buns" to $110.

Mary on the other hand has decided to let her price remain the same.

Explain using demand and supply analysis the impact that this would

have on the demand for both sellers products.[6 marks]

QUESTION 2 - [20 marks] CLO 2, 3

Marie attends a Top Notch University. The prices for food items in the canteen are far more expensive than one would find in a regular corner shop. The canteen has realised that its costs are rising (including the opportunity cost of time), so they must raise their proces.

Marie must eat while she is at school because she is diabetic, so she purchases items from the local canteen. Marie buys jerk chicken and sausages.

When the price of jerk chicken is $120, Marie buys 1 sausage

When the price of jerk chicken increases to $140, Marie buys 3 sausages

1. Calculate the value of Marie's cross price elasticity of demand
2. between jerk chicken and sausages.[5 marks]
3. What is Marie's relationship between jerk chickem and sausages.
4. Explain your answer.[5 marks]

The university has offered Marie a job in the bookshop. Marie makes $55,000 per month.

In a given month, she buys 2 pairs of shoes. After two years of being a good employee, Marie was given a 10% increase in her monthly income.

In the first month of her income, she purchased 4 pairs of shoes.

1. Calculate Marie's new monthly income.[3 marks]
2. Calculate Marie's income elasticity of demand for shoes.[3 marks]
3. Are shoes an inferior or a normal good for Marie?
4. Explain your answer.[4 marks]

QUESTION 3 - [30 marks] - CLO 2, 3, 5

Caribbean Corporation Limited produces and sells product CCL at a current market price of $150 and incurs fixed costs of $300 per period. The Board of Directors employed you, a Marketing & Finance Specialist to prepare a report for the Executive Management Team in which you are required to address the following.

Quantity

Total Cost ($)

Marginal Cost ($)

Average Costs ($)

Total Revenue($)

Marginal Revenue ($)

Profit ($)

0

300

1

400

2

450

3

510

4

590

5

700

6

840

7

1020

8

1250

9

1540

10

1900

(a)Explain the difference between fixed costs and variable costs. [4 marks]

(b)Complete the missing cells in table above. [10 marks]

(c)What time period is the firm operating in? Justify your answer. [3 marks]

(d)Based on your response to part (b), under which market structure

does Caribbean Corporation Ltd. operate?

Justify your answer and list 3 features of that market structure. [5 marks]

(e)Determine the profit maximizing level of output. [2 marks]

(f)The firm is considering ways of reducing its production costs.

A member of the executive team suggested that they import a portion

of their raw materials, despite the obvious concerns relating to import duties.

Identify and briefly explain two (2) barriers to imports that the executive

team should consider before finalizing their decision.[6 marks]