Description
ECS2601 ASSIGNMENT 1 SEMESTER 1 2025 – DUE 2 APRIL 2025. FULLY ANSWERED. Question 1
1.1. In microeconomics we need to make certain assumptions about the preferences of
consumers. Use real life examples to explain any two of these assumptions. 1.2. Critically evaluate why the marginal rate of substitution between two goods must equal the
ratio of the price of the goods, for the consumer to achieve maximum satisfaction. 1.3. Comment on any two of the following topics related to elasticities:
A) Arc elasticity of demand
B) Cross price elasticity of demand
C) Infinite elastic demand
D) Price elasticity of supply
1.4. Discuss the likely shape the indifference curves related to the following items will have
(makes sure to also include a graph in your explanation):
A) Printers and ink cartridges
B) A box of chicken wings bought at different take away stores (you may choose which stores!
You can also assume that they include the same number of wings)
Question 2
2.1. The table below contains information about the market for certain electronic components.
Price (Euros) Units Demanded (Thousands) Units Supplied (Thousands)
3 14 2
6 12 4
9 10 6
12 8 8
15 6 10
18 4 12
A) Evaluate the impact of a price ceiling of €10,50 being introduced.
B) Determined the elasticity of demand given an increase in the price from €12 to €15. Make use
of the arc elasticity formula and comment on your results.
2.2. Sarah spends her wages on only two goods namely brown bread and hot chocolate. Suppose
that government decides to increase the Value-Added Tax (VAT) rate by 13.3%. However, the
adjustment on certain staple goods, including brown bread, is zero rated. Illustrate and discuss
Sarah’s optimal consumption bundle before and after the VAT adjustment.
Question 3
3.A newly established wildlife reserve in Namibia is trying to determine the price it should
charge for day visitor tickets. Based on data from their tourism board the management decides
to distinguish between foreign and local visitors. The following provides the estimated demand
curves for foreign (QF) and local (QL) visitors:
3.1. Assume that, for a start, they decide to charge N$30 per ticket. Graphically illustrate the
demand curves for both foreign and local visitors.
3.2. Using the price and quantities as calculated in 3.1 above, calculate the price elasticity of
demand for each group (use point elasticity).
3.3. Will the reserve be maximizing its profit at the given price? Explain your answer by using
the elasticities you calculated in the previous question.
3.4. Calculate what price management should be charging foreigners in order to maximize
revenue collected from ticket sales? (hint: Use the formula for elasticity and set it equal to -1)
Question 4
4.1. Choose your own example to differentiate between a production function and an isoquant.
4.2. Using the definition of marginal rate of technical substitution (MRTS), explain what aMRTS
equal to 5 tells us about changes in the number of units and output.
4.3. Explain what is likely to happen to MRTS if more and more labour is substituted for capital.
remy –
⭐⭐⭐⭐⭐