Question 1
a. Why is Economics considered a science?
b. Why do Economists make assumptions?
c. Should an economic model describe reality exactly?

Question 2
Using demand and supply analysis, illustrate how each of the following scenarios would affect the equilibrium price and quantity in the respective markets. The use of carefully labelled diagrams is required.
a. The introduction of a new technology reduces the cost of production for all firms in the computer market.
b. A strong advertising campaign has caused consumer to demand more Pepsi at every existing price.
c. The passage of a category 5 hurricane destroys fifty per cent of the carrot crop.

Question 3
Based on your understanding of elasticity, will the elasticity of demand for Honda sedans increase, decrease, or remain the same when each of the following events occurs? Explain your answer.
a. Other car manufacturers, such asToyota,decide to make and sell sedans.
b. Sedans produced in foreign countries are banned from the European market.
c. Following increased advertisements, Europeans believe that sedans are safer than ordinary passenger cars.
d. In the long run, new sedan models are produced.

Question 4
The demand for petroleum is given by ð‘„ð·=85âˆ’0.4ð‘ƒ where ð‘„ð· is the quantity demanded in thousands of barrels per day and P is the price per barrel in dollars. The supply of petroleum is given by ð‘„ð‘ =55+0.6ð‘ƒ.
a. Calculate the equilibrium price and equilibrium quantity of petroleum
b. Calculate the demand and supply for petroleum if the market price is $15 per barrel. What problem exists in the economy? What would you expect to happen to price?
c. Discuss two(2) of the factors which influence price elasticity of supply for a firm
d. What is the value of price elasticity of demand when price is$20? Is demand in elastic or elastic?

Question 5
Due to the impact of Tropical Storm Harry in Caribbean, the price of sugar rises from $0.50 to $1.00 per bag and the quantity demanded falls from 1000 bags to 400 bags.
a. Calculate the elasticity of demand for sugar
b. Is sugar elastic, unitary elastic, or inelastic in this price range?
c. What is the interpretation of that price elasticity of demand?
d. If the price of sugar were to increas by 15 percent, what would be the percentage change in the quantity demanded?
e. What happens to total revenue for sugar producers sellers when the price of increases? Explain your answer.

Question 1 a. Why is Economics considered a science? b. Why do Ec...