QUESTION 1

Industry supply and demand for pharmaceutical products are given by:

QD = 3000 - P and

QS = 2P

a)What is the equilibrium price and quantity?

b)At a price of RM500, will there be a shortage or a surplus, and how large will it be?

c)At a price of RM2000, will there be a shortage or a surplus, and how large will it be?

d) Show in separate diagrams the effect on the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity of the market for newspapers in your town, when:

(i)The salaries of journalists go up.

(ii)There is a big news event in your town, which is reported in the newspapers.

Justify and explain your diagrams.

QUESTION 2

a) As the Manager of a fast-moving consumer goods (FMCG) company, you wish to apply the pricing theory in determining the price of the goods. Explain the process of your decision making with emphasis on the determinants of price elasticity of demand.

b) "JAKARTA: Indonesia wants to lower its reliance on natural resources and President Joko Widodo is turning the spotlight on films, fashion and handicrafts....

...Indonesia's economic fortunes have for long been tied to its resources industry and Widodo, also known as Jokowi, in 2015 set up the agency for creative economy to promote foreign investment in sunrise sectors like entertainment, fashion textiles and packaged food.

The government's move to allow foreign investments in films, movie distribution and exhibition has lured foreign investors including 21st Century Fox Inc. and South Korea's Lotte Cinema Co.

"The focus on creative economy is really paying off," Munaf said in an interview at his office in central Jakarta on April 2. "The removal of the film industry from the negative list for foreign investors has led to a surge in the number of screens and viewership for Indonesian and Hollywood movies alike."

Within three years of opening film production, exhibition and distribution to foreign investors, the number of movie screens in Indonesia jumped 50 percent to 1,500 while ticket sales soared to 42.7 million last year from 16 million in 2015, Munaf, a former advertising professional appointed by Jokowi, said." (Source: The Star, 5 April 2018)

Based on the newspaper article above, state the market structure for the entertainment industry. Explain FOUR (4) characteristics of this market structure.

c) The table below shows cost and revenue for a firm:

Quantity

Cost per unit

Revenue per unit

100

1.00

3.00

200

1.50

3.00

300

2.00

3.00

400

2.50

3.00

500

3.00

3.00

i)Calculate marginal revenue and marginal cost for every change in quantity.

ii)State the quantity where the firm maximizes profit.

QUESTION 3

a) Describe the four phases of a business cycle using a graph. Which phase of the business cycle is most countries in the world is facing currently due to the Covid-19 pandemic? Clarify your answer with evidence(s).

b) Based on your explanation in part (a) above, which phase of the business cycle will unemployment take place? Justify unemployment during this pandemic situation.

(Hint: definition and types of unemployment, which type during pandemic situation)

c) Consumer Price Index (CPI) declined 1.3 per cent in July 2020 to 119.9 as against 121.5 in the same month of the preceding year. The decrease in the overall index was attributed by the decline in Transport (-10.3%), Housing, Water, Electricity, Gas & Other Fuels (-2.6%), Clothing & Footwear (-0.6%) and Furnishings, Household Equipment & Routine Household Maintenance (-0.1%) which contributed 45.7 per cent to overall weight.

(Source: Department of Statistics Malaysia, 2020)

Based on the paragraph above, CPI has overall decreased in July 2020. Explain how this will affect the inflation rate of Malaysia for the same period by providing numerical justifications.

QUESTION 4

a) Your company carries out international trading with Japan. However, Japan tries to protect their own companies against competition from other countries. Identify and discuss the different forms of protectionism policy that Japan can enforce.

b) KUALA LUMPUR: Ahead of Budget 2020, prominent economist Prof. Jomo Kwame Sundaram has called for "smart taxation" in Malaysia, which aims to increase the country's tax collection without hiking tax rates. Speaking to reporters at a media briefing, he said that it was important for the government to reduce or eliminate unnecessary tax exemptions offered to corporations and businesses operating in Malaysia. (Source: The Star, 26 September 2019)

Based on the paragraph above, what tax structure is the Malaysian government practising? Explain and justify with examples. What are the other tax structures practised by other governments today? Define and explain using graphs.

c) The Great Depression was a worldwide economic depression that lasted 10 years. It began on "Black Thursday", October 24, 1929. Over the next four days, stock prices fell 22% in the stock market crash of 1929. That crash cost investors $30 billion, the equivalent of $396 billion today. That terrified the public because the crash cost more than World War I.The Depression had begun earlier in August when the economy contracted. (Source: The Balance, 2019)

Based on the paragraph above on the Great Depression, it has changed the role of the monetary policy. Explain the objectives of a monetary policy after the Great Depression.