Think about the demand for the three popular laptops: ACER, ASUS, and DELL. Using supply and demand diagrams, explain the effect on the demand for ACER or the quantity demanded for ACER (other things remaining the same) because of the following:

a)The price of an ACER rises. (2 marks)

b)The prices of an ASUS and a DELL decrease. (2 marks)

c)Programmers who develop operating system for ACER become more costly to hire.(2 marks)

d)In Sydney market, demand for ACER is given by the equation P = 30 - 2Q^d and supply of ACER is given by the equation P = 6 + 4Q^s. If Sydney market is in equilibrium, determines the equilibrium price (P) and quantity (Q) of ACER and show the equilibrium condition in a graph. (4 + 3 marks)

e)From the equilibrium in part d), if price of an ACER decreases to $16, what would be the quantity demanded for ACER, show this using a graph. In this case, calculate the price elasticity of demand for ACER. (4 + 3 marks)

Question 4 (20 marks)

Kim can produce 100 pies or 400 cakes an hour. Liam can produce 150 pies or 300 cakes an hour.

a)If Kim and Liam spend 30 minutes of each hour producing pies and 30 minutes producing cakes, how many pies and cakes does each of them produce? (3 marks)

b)Calculate opportunity cost of producing pies and cakes for Kim and Liam. (5 marks)

c)Determine comparative advantage for each product and decide who should make pies and who should make cakes? Explain why. (5 marks)

d)If Kim and Liam specialise and trade, what is the highest price of a pie at which Kim and Liam would agree to trade pies and cakes between them? What are the gains from trade?(4 + 3 marks)