BUSINESS ECONOMICS
1A) What is the definition of opportunity cost?
The best alternative that we forgo, or give up, when we make a choice or a decision is called the opportunity cost of that decision.
1B) Eason wants to spend $15 to buy a pack of sandwiches or a bowl of fish-ball noodles form a street hawker. Explain the effect on Eason’s opportunity cost of buying the sandwiches if a cockroach is found inside the noodle soup.
Eason’s opportunity cost of buying the sandwiches is a bowl of fish-ball noodles, however, there is a cockroach found inside the noodle soup, therefore his opportunity cost would decrease due to the value of the fish-ball noodles would decrease because of a cockroach found.
2A)(i) Distinguish between change in demand and change in quantity demanded.
1. Change in demand means a shift of demand curve. i.e. the change is caused by factors other than change in price.
2. Change in quantity demanded is the movement along demand curve. i.e. the change is caused by change in price.
2A)(ii)Discuss any four factors which would affect the shift in demand.
Change in demand can be due to below main categories other than the price of product as below:
Price of substitutes: Increase in price for substitute goods will increase the demand for this good as people will switch from substitutes. For example, if the price of Coke goes up, the demand for Pesi would rise as people switch from one to the other.
Price of complementary goods: Complementary goods are consumed together. Therefore, higher price of complementary good will lower the demand for this good. For example, increase in price of VCD would cause decrease in demand of VCD players.
Consumer income: As consumer income rises, the demand for most goods would rise. As people become richer, they demand higher quality goods and thereby demand for cheaper goods decreases.
Fashion and taste: People tend to buy desirable products. Demand for highly advertised product is likely to rise.
2B)(i) Fewer
The best alternative that we forgo, or give up, when we make a choice or a decision is called the opportunity cost of that decision.
1B) Eason wants to spend $15 to buy a pack of sandwiches or a bowl of fish-ball noodles form a street hawker. Explain the effect on Eason’s opportunity cost of buying the sandwiches if a cockroach is found inside the noodle soup.
Eason’s opportunity cost of buying the sandwiches is a bowl of fish-ball noodles, however, there is a cockroach found inside the noodle soup, therefore his opportunity cost would decrease due to the value of the fish-ball noodles would decrease because of a cockroach found.
2A)(i) Distinguish between change in demand and change in quantity demanded.
1. Change in demand means a shift of demand curve. i.e. the change is caused by factors other than change in price.
2. Change in quantity demanded is the movement along demand curve. i.e. the change is caused by change in price.
2A)(ii)Discuss any four factors which would affect the shift in demand.
Change in demand can be due to below main categories other than the price of product as below:
Price of substitutes: Increase in price for substitute goods will increase the demand for this good as people will switch from substitutes. For example, if the price of Coke goes up, the demand for Pesi would rise as people switch from one to the other.
Price of complementary goods: Complementary goods are consumed together. Therefore, higher price of complementary good will lower the demand for this good. For example, increase in price of VCD would cause decrease in demand of VCD players.
Consumer income: As consumer income rises, the demand for most goods would rise. As people become richer, they demand higher quality goods and thereby demand for cheaper goods decreases.
Fashion and taste: People tend to buy desirable products. Demand for highly advertised product is likely to rise.
2B)(i) Fewer