Basic economics Assignment microeconomics Essay

Basic economics Assignment microeconomics - Essay Examplea. Price Elasticity of Demand 9 4. b. Short-Run and long haul Price Elasticity 12 4. c. Price Elasticity of Demand for a Particular Brand 13 4. d. If Price Elasticity of Demand for Cig arttes Is Inelastic 13 References 14 Bibliography 15 1. a. Impact on Law of Demand when there is no Scarcity of Resources According to a theory of Law of demand, an opposite relationship exists between sum demanded by customers and hurt of products and/or services. If there is no scarcity of resources in a given foodstuff, the price of a commodity may fall rapidly which in turn go forth provide rise to demand of the commodity. As express in the theory, a decrease in price of a commodity increases its demand in market. Moreover, in economic perspective, human nature is termed to be always demanding which depicts that demand of commodity will stop to rise and thereby affecting its price at large. Therefore, it can be stated that whether the re is a scarcity of resources or not, the Law of Demand will still exist (Baumol & Blinder, 2009). Consequently, price rationing can also be observed in this case due to a fact that demands of human-beings are termed to be never-ending or unlimited. However, on the contrary, resources of goods are limited. Thus, price rationing will be strongly evident (Maddala, 2004). Conclusively, from an economic point of view, it can be stated that resources will be efficiently used when there is no scarcity. ... efects of a Market System In the study of microeconomics, three fundamental problems faced by any society are What goods and/or services can be produced in a given society and what will be an appropriate quantity of production? How to produce the required goods and/or services? The produced goods and/or services will be targeted to which market segment or customers? (Gabay & Et. Al., 2007). On the similar context, price mechanism is referred to as determining prices of goods and/or serv ices with the influence of various forces of demand and supply in a given society. The theory assumes to have no interference in terms of external factors to the society. According to a theory of economics, producers always tend to produce those commodities which can be sold in market at a high price and apply those production techniques which are cost-efficient in order to maximise their profits. Similarly, customers tend to favour products which are little costly and thus it determines the price of the commodity in a given market. Thus, price mechanism states an interdependent relationship between self-interests of producers and buyers. In other words, actions of producers are regulated by actions of consumers and vice-versa. This efficiently determines quantity of production and price of a commodity, solving the three fundamental problems of a society (Jain & Khanna, 2007). However, there are a few defects that exist in a market which provides rise to various limitations of pric e mechanism theory. They can be identified as, market competencies, inefficient or wasteful productions, external influences, indolence of commodities, uneven circulation of income and others (Jain & Khanna, 2007). 2. a. Reasoning The aspect of opportunity cost can be well identified in this case. It is