Question (1)

Price elasticity of demand may lead to price discrimination. Explain this statement in a suitable detail.

Question (2)

A good wheat harvest will generally lower the income of farm-ers. Illustrate this proposition using a supply and demand dia-gram.

Question (3)

Many governments attempt to help farmers by reducing their production. How could this be in the interests of farmers?

Question (4)

For each pair of commodities, state which you think is the more price-elastic and give your reasons.

a. Perfume and salt.

b. Penicillin and ice cream.

c. Ice cream and chocolate ice cream.

Question (5)

The demand for unskilled labor is relatively elastic in Egypt and the average level of wage for unskilled labor is L.E800. If the government decided to place a minimum wage of L.E1200:

a. Show this situation on a suitable graph.

b. What will be the effect of the placed minimum wage on total wages of unskilled labor?

c. What advice could you provide to the Egyptian government in this regard? Explain your point of view.

d. In case of the demand for skilled labor is relatively inelastic, will the situation change?