Question 1:

The cross-price elasticity of two pairs of good is shown below.

Air-conditioning units and kilowatts of electricity, and cross price elasticity is -0.34.

Coke and Pepsi, and cross price elasticity is + 0.63.

Explain the sign of each of the cross-price elasticities. What does it imply about the relationship between the two goods?

Question 2:

In Malaysia, medical costs have increased suddenly than other prices during Covid-19 Pandemic. Rising medical costs have affected consumer alternatives, let X represent the quantity of medical items, and Y represent the quantity of food items. Let income (M) of a household is RM200, the price of medical items X = 4, and price of food items Y = 5.

Draw the budget line and determine the market rate of substitution. Explain what happens to the budget constraint if price of medical items (Px) increases from RM 4 to RM10 while price of food items remains the same.

Question 3:

The government generally protects buyer and seller through introducing price regulation in the market. Draw a diagram and explain why Price Ceiling strategy is inefficient for optimum consumer and producer surplus.

Question 4:

Advertisement is one of the factors that influence customers to increase demand for a specific goods Y. Explain how the budget line shift due to price change of good Y when the price of good X remain the same.

Question 5:

Draw a diagram to derive Individual demand curve and Market demand curve.