question 1

identify the elements of scarcity , choice and opportunity cost in each of the following:

a. The zambia environmental management agency is considering an order that a 500 acre area on the outskirts of lusaka city be preserved in its natural state, because the area is home to a rodent that is considered an endangered species. developers had planned to build a housing a development on the land.

b. the manager of an automobile assembly plant is considering whether to produce cars or sport facility vehicles(SUVs) next month. assume that the quantities of labor and other materials required would be the same for either type of production.

question 2.

coca cola beverages zambia produces a good (called X) that is a normal good. its competitor , Big Tree Beverages limited a subsidiary of Trade kings zambia limited makes a substitute good that it markets under the name "y" . good Y is an inferior good.

a . define a normal good?

b. define an inferior good?

c. how will the demand for good X change if the price of good Y decreases?

d. is good Y a lower quality product than good X?

question 3

a. suppose you are the manager of kaoma coffee limited and your marketing department has estimated the demand function of kaoma coffee to be as follows

Qd = 10,000 - 200P + 0.03POP + 0.6I + 0.2A

where Qd is the quantity demanded per month , P is price , POP is population , I is the disposable income and A is advertising expenditure.

suppose the company is only interested in the influence of price on quantity demanded and it holds all the other factors constant by assuming the values of non price factors to be POP = 1,000,000 , I = 30,000 , And A = 15, 000

1. derive the demand function of kaoma coffee limited with price being the only independent variable
2. if you decided to increase the price of coffee P , what would happen to the quantity demanded of coffee?
3. assume the price of coffee is set at 100 , calculate the price elasticity of demand at this price and interpret the value found?

b. explain the relationship between own price elasticity of demand and total revenue