Explain whether each of the following statements is true or false. Diagrams are not required.
(a) The equilibrium price and quantity for plant-based burgers in the market will definitely increase when the price of beef burgers and the costs of producing plant-based burgers increase at the same time.
(b) Dark chocolates have emerged as a rising favourite for consumers due to their powerful source of antioxidants. At the same time, the price of cocoa beans decreases slightly. As a result, the equilibrium price and quantity for dark chocolates will definitely increase.
2. The following information relates to Sunrise Company, a firm that produces sports shoes in monopolistic competition in the short run.
(a). Based on the above information, explain the type of profit that the company earned.
(b) Explain whether the company should produce or shut down in the short run.
The data below shows the quantity demanded of wallets for the various prices.
(a). Use the midpoint formula to calculate the price elasticity of demand of wallets if their price increases from $28 to $35.
(b). From your answer in part 3(a), explain whether the seller should raise or reduce the price of wallets in order to increase total revenue.
4. Read the extract from The Straits Times “Singapore GE2020: Minimum wages or progressive — Which will help more?” dated 19th Jul 2020.
The Workers’ Party (WP), for instance, proposed a national minimum take-home wage of $1,300 a month for full-time work, the amount an average four’ person household in Singapore needs to spend on basic necessities such as food, clothing and shelter each month”
(a) Explain the type of price control proposed by the Workers’ Party (WP) in Singapore.
(b) Draw a labour market diagram and indicate the following in your diagram.
(i) Minimum wage of $1,300 and
(ii) Effect of the minimum wage on the market for unskilled labour.
5. Consider Country Alba produces only three products in a simple economy: Rice, bread, and milk. Assume that 2018 is the base year.
(a) Calculate the Consumer Price Index in 2019.
(b) Calculate the inflation rate in 2019.
(c) Based on your answer in Question 5(b), explain whether a 5% increase in pay for Mr Wan in 2019 will raise his real income.