TECO401 Term 1: Microeconomics Assignment Answer

TECO401 Term 1 2020
Australian National Institute of Management and Commerce (IMC)

Microeconomics Assignment

Show your work, give reasons; no credit for correct answers if the derivation is missing. 

1 Question 1 (15 marks)

The supply of mango in Sydney is P = 2+Q and the demand of mango is P = 8−2Q.

2. If the price of the mango is $6, how many mangoes are supplied in the market? how many mangoes are demanded in the market? Is this an excess of supply or a shortage of supply? (3 marks)

3. Draw the Supply and demand curve and find the equilibrium. (3 marks) Calculate the consumer surplus and supplier surplus. (3 marks) Calculate the elasticity of demand at the equilibrium point. (3 marks)

4. Calculate the elasticity of demand when the price is $2. If we ignore the supply curve, will the revenue decrease or increase when the price is $2, comparing to the equilibrium point? (3 marks)

Question 2 (15 marks)

Nick and Connie can both choose between watch a movie or have Korean BBQ. The payoff of the game is given as follows. Assume both players make their choice separately and simultaneously.

1. Who are the players of the game and what are the strategies for each player? (3 marks)
2. Does either player have a dominate strategy? (3 marks)
3. How many potential equilibria are there? What are the equilibrium? (3 marks)
4. Is it a prisoner dilemma? Explain. (3 marks)
5. If Connie can make the choice first and Nick will observe Connie’s choice, what will be the optimal outcome? Hint: you can draw a tree to illustrate this situation. (3 marks)