Assignment For Microeconomics 30 Marks Given The Information

Assignment For Microeconomics30 Marksgiven The Information Of A Cert

Given the information of a certain good (say chicken), consisting of the quantity of chicken in different prices of its supply and demand, in the Excel file attached to this assignment. The rows 3, 4, and 5 in the Excel file exhibit the quantity of chicken, the price of chicken demand, and the price of chicken supply, respectively. Please send the soft copy of your assignment to “[email protected]” and submit a hard copy in class before 5pm on the due date (17/04/2018). Students should insert their last two student numbers in Cell A1 in Excel to generate their own data, and then answer the following questions:

1. Draw the demand curve using the quantity and demand data of chicken provided in rows 3 and 4 of the Excel (1 mark).
2. Draw the supply curve using the quantity and supply data of chicken provided in rows 3 and 5 of the Excel (1 mark).
3. Write the demand curve equation of chicken where Y is the dependent variable, b is the slope of the demand curve, and X is the independent variable (3 marks).
4. Write the supply curve equation of chicken where Y is the dependent variable, b is the slope of the supply curve, and X is the independent variable (3 marks).
5. Calculate the market equilibrium point for chicken. Determine excess supply area on the figure and explain what the area tells us? (4 marks)
6. What is the opportunity cost of consuming an additional chicken? (2 marks)
7. What is the opportunity cost of paying an additional one dollar for chicken? (2 marks)
8. If the price of beef meat goes up, what happens to the market equilibrium point, price, and quantity of chicken? Explain your answer (2 marks).
9. If IT technology is applied to nurture chickens in aviculture, what happens to the market equilibrium point, price, and quantity of chicken? Explain your answer (2 marks).
10. Assuming that the intersection between the first quantity (cell B3 in Excel) and the first demand (cell B4 in Excel) is called point A, the second quantity (cell C3 in Excel) and the second demand (cell C4 in Excel) is called point B, the third quantity (cell D3 in Excel) and the third demand (cell D4 in Excel) is called point C, and so on. Similarly, intersections between quantity and supply form points I to N. Calculate the elasticity of demand for chicken at point C when the price moves from point B to point C. What is the relation between changes in price and total expenditure at point C? (4 marks)
11. Calculate the elasticity of supply for chicken at point M when the price moves from point L to point M. What is the relation between changes in price and total expenditure at point M? (2 marks)
12. Calculate consumer surplus. Interpret your result. (2 marks)
13. Calculate producer surplus. Interpret your result. (2 marks)

Please send the soft copy of your assignment to “[email protected]” and submit a hard copy in class before 5pm on the due date (17/04/2018).

Paper For Above instruction

Economic analysis of supply and demand in the context of chicken consumption offers essential insights into market dynamics, consumer behavior, and producer incentives. This paper addresses the specific tasks outlined in the assignment, utilizing data and graphical methods to elucidate the key concepts of demand, supply, equilibrium, elasticity, and surpluses, based on the provided Excel data. The analysis not only demonstrates technical proficiency but also interprets the economic implications of changes in market conditions.

Introduction

Microeconomics investigates how individual consumers and producers interact within markets to determine prices and quantities. The market for chicken provides a typical case where supply and demand curves intersect to establish an equilibrium price and quantity. This analysis incorporates graphical representations, algebraic formulations, and elasticity calculations to explore how shifts in external factors influence the chicken market’s behavior. Such understanding is crucial for stakeholders, policymakers, and economists aiming to regulate or predict market outcomes effectively.

Graphical Representation of Demand and Supply

Using the Excel data, the demand curve is plotted by connecting points that represent quantities of chicken demanded at various prices. Similarly, the supply curve is derived from the respective quantities supplied at different prices. These graphs visually demonstrate the inverse relationship between price and demand, and the direct relationship between price and supply, which are foundational principles in microeconomics.

From the data in rows 3 and 4, the demand curve can be plotted, typically showing a downward slope, indicating that as the price decreases, the quantity demanded increases. Conversely, the supply curve, derived from rows 3 and 5, exhibits an upward slope, reflecting that higher prices incentivize producers to supply more chicken.

Derivation of Demand and Supply Equations

To formulate the demand curve equation, a linear regression approach is applied to the data points. Using the demand data and corresponding quantities, the slope (b) is calculated, and the demand function takes the form:

Y_d = a_d - b_d X

where Y_d is the quantity demanded, X is the price, and a_d is the intercept. Similarly, the supply curve equation is obtained by regression on supply data, expressed as:

Y_s = a_s + b_s X

In these equations, a_s and a_d are intercepts indicating quantities demanded or supplied when price is zero, and b_s and b_d are slopes representing responsiveness to price changes.

Market Equilibrium and Excess Supply

The equilibrium point is determined where the demand and supply equations intersect, indicating the market-clearing price and quantity. Calculating this involves solving the simultaneous equations derived in the previous section. The excess supply area, visually represented as the space between the supply curve and the demand curve above equilibrium, signifies surplus quantities when supply exceeds demand at a given price. This surplus signals potential downward pressure on prices until the market reaches equilibrium.

This region highlights inefficiencies and influences market adjustments, such as reduced prices or increased consumption. The size of the excess supply area offers insight into the degree of market disequilibrium and potential for market correction.

Opportunity Cost Analysis

The opportunity cost of consuming an additional chicken corresponds to the forgone benefits or alternatives sacrificed, often approximated by the marginal cost of production or the next best foregone activity. When considering the opportunity cost of paying an extra dollar for chicken, the consumer's willingness to pay and the price elasticity of demand provide relevant frameworks. If demand is elastic, a small price increase could significantly reduce quantity demanded, translating into a higher opportunity cost represented by lost consumer surplus.

Market Responses to External Changes

An increase in beef prices typically leads consumers to substitute chicken for beef, increasing demand for chicken. This shift causes the demand curve to move outward/rightward, resulting in a higher equilibrium price and quantity of chicken. Conversely, technological advancements in poultry farming, such as improved breeding or feeding technologies, reduce production costs, shifting the supply curve outward/rightward. This results in lower prices and higher quantities sold, reflecting increased efficiency and productivity in the chicken market.

Elasticities of Demand and Supply

Elasticity measures the responsiveness of quantity demanded or supplied to price changes. At point C, when the price shifts from point B to point C, the demand elasticity can be calculated using the midpoint formula:

Elasticity of demand = [(Q_C - Q_B) / ((Q_C + Q_B)/2)] / [(P_C - P_B) / ((P_C + P_B)/2)]

This elasticity indicates whether demand is elastic (>1), inelastic (

Similarly, for supply elasticity at points M and L, the same approach applies, but focusing on supply quantities and prices.

Consumer and Producer Surplus

Consumer surplus represents the difference between the maximum price consumers are willing to pay and the actual market price. It reflects the economic benefit consumers receive when purchasing goods at a lower price than their valuation. Producer surplus, on the other hand, measures the difference between the market price and the minimum acceptable price producers are willing to accept, indicating producer benefits.

Calculating these surpluses involves integrating the demand and supply curves up to the equilibrium point or using geometric methods on the graphs. The magnitude of these surpluses signals the efficiency and welfare distribution within the market.

For instance, a higher consumer surplus indicates greater consumer benefit possibly due to lower prices or increased demand, while a larger producer surplus suggests higher profitability for producers.

Conclusion

The microeconomic analysis of the chicken market, centered around supply-demand interactions, elasticity computations, and welfare measures, demonstrates the complex interplay of factors influencing market outcomes. External shocks like changing prices of related goods or technological innovations significantly shift equilibrium points. Through graphical and algebraic methods, this analysis offers a comprehensive understanding of how markets adjust and what economic welfare measures reveal about market efficiency and consumer-producer benefits.

References

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