Chapter 3, Production (Week Seven)

Short - run and Long- run Production

Short - run period   
- is the time frame in which at least one of the input is fixed but the other input are varied

Long - run period
- is the time frame in which all inputs are variables

Fixed input
-quantity does not change according to output

Variable input
- quantity changes according to output


                                                               Type of Production


a) Primary Production
-Involved in the first stage on the production process
-Primary stage of production
-included the extractive industries
 Example: coal mining, iron , agricultural, fishing

b) Secondary Production
-Invoved  in manufacturing the finished good
-Included textile manufactures, motorcar, steel industries, consumer goods
and industriesin general

c) Tertiary Production
-Do not produce goods but provides services
- consists of two parts
1. commercial services
2. direct services


Commercial services
-include the all those industries engaged in the movement in commodities.
-examples: Maybank, Prudential Insurance, tesco, Mas Cargo


Direct services
-not rendered to material goods, as in commerce
-example: Doctors and teachers

For futher informations regarding to this topic, refer to this link

http://amir-economy.blogspot.com/2012/03/definition-of-production.html

                                     

Preparation for exam (Week Six)

Section B: Structured Questions


1. State whether each of the following statements concerns ‘Micro’ or ‘Macro’

a)      Toyata had increased the production of a new hybrid car since May 2009
b)      The number of workers in a cement industry has increased tremendously over the last five years.
c)       China’s unemployment rate had decreased since the implementation of an economy.
d)      Meat prices have increased as a result of a higher tariff rate.
e)      The demand for cars is anticipated to rise ever since the government raised the income of civil              servants.
f)       In 2009, Malaysia’s inflation rate was 2.9%.
g)      The import of rice from Thailand and Vietnam has increased in tandem with domestic                            consumption.

2. State whether each of the following statements is a positive or normative statement.

a)      When the consumer income increases, food consumption at fast food restaurants also                           increases.
b)      The government should lower the driving speed in school zones to reduce aaccidents.
c)       An increase in interest rates will discourage investments.
d)       Protectionism policies on imported goods are necessary for all countries and should be                         practiced.
e)      Low-income groups should pay lower taxes compared to high-income groups.



3. When the price per carton of Cola Cola falls from RM16 to RM14, the quantity demanded               increases from 200 to 300 cartons per month. On the other hand, the demand for Pepsi                 falls from 250 to 200 cartons per month.

          

a)   Calculate the price elasticity of demand using the midpoint formula

b)   If the price of Cola Cola increases, what will happen to the total revenue of Cola Cola. Explain.

c)   Calculate the cross elasticity of demand between Cola Cola and Pepsi. Based on the answer,                 explain the relationship between the two

4. The following table shows the demand and supply schedule for coconuts.

PRICE (RM/ton)	Quantity demaded (tons)	Quantity supplied (tons)
12	8	21
11	12	19
10	16	16
9	20	13
8	24	10
7	28	7
6	32	4
5	36	0

a)   Using graph paper, draw the market demand and supply curves for the coconuts.

b)   What are the equilibrium price and equilibrium quantity if the coconuts?

c)   If the price of the coconuts is RM8, there will be _________ of _________ tons.

d)   If the price of the coconuts is RM12, there will be _________ of _________ tons.

e)   Calculate the price elasticity of supply when the price of the coconuts increases from RM6 to             RM8 per ton. Is supply elastic or inelastic at this price range?

Preparation for exam (Week Six)

Assalamualaikum.

Week Six already? 

Sir Amir asked on this week we need to update about preparation for exam. So, we will provide you with the question. Try to answer the question below. Try to not look for the notes, if you still refer to the notes then you are not ready for the examination. Good Luck!

Section A: Multiple-choice Questions

1. A mixed economy is an economy that ___________.

              A) Changes from a pure free to a pure planned economy

              B) Has elements of dictatorship

              C) Is a mix of pure free and pure planned economies

              D) Has minimum government interventions

     2.  The following are characteristic of a pure planned economy, except _________.

    

              A) achieves an equal income distribution

              B) public ownership of resources

              C) price mechanism of lesser importance

              D) stimulates innovation

     3.  The problem of scarcity arises due to  __________.

  

              A) human being greed

              B) limited available resources

              C) government restrictions to the productionof too many goods and services

              D) ineffecient production methods to expand the production of goods and services

    4.  "The government should implement non-smoking zones in public places to reduce the incidence           of cancer " This statement is a __________.

              A) normative statement

              B) positive statement

              C)both a normative and positive statement

              D) None of the above

     5.  A movement along the PPC implies

              

              A) labour force has increased

              B) productivity has increased

              C) society has chosen a different set of output

              D) improvement in technological 

     6.  _________ is studying how Ahmad allocates his time between work and leisure

              A) Microeconomics

              B) Macroeconomics

     7.  Given the decreasing opportunity cost, the PPC is _________.

              A) convex

              B) concave

              C) linear 

              D) a vertical line

     8.  The study of international trade and national income is part of __________.

              A) global economics

              B) elected representative of people

              C) price mechanism

              D) action of producers

     9.  __________ goods are goods where the demand is negatively related to income.

              A) Complement

              B) Normal

              C) Substitute

              D) Inferior

    10.  An economist would estimate the ______ to determine the relationship between two goods

              A) income elasticity of demand

              B) cross elasticity of demand

              C) price elasticity of demand

              D) price elasticity of supply

    11.  Which of the following pairs is a substitute?

              A) Mobile phone and charge

              B) Wool and cotton

              C) Salt and pepper

              D) Tea and sugar

    12.  Seller would offer ____ for sale as price decreases and thus the supply curve is _____ sloping

              A) less; upwards

              B) more; upwards

              C) less; downwards

              D) more; downwards

    13.  Which of the following is the non-price determinant of supply of wheat

              A) A decrease in the price of corn

              B) A decrease in the price of wheat

              C) Improvements in the techniques of growing wheat

              D) A decrease in the price of wheat farming machinery and equipment

    14.  As the price of eggs increases, Sophie's production of cakes _________.

              A) increases the supply of cakes

              B) decreases the supply of cakes

              C) increases the quantity supplied of cakes

              D) decreases the quantity supplied of cakes

    15.  Ahmad runs a catering business. He received a wedding food order for 1000 people and needs 

           a worker to help him with the order. The demand for a worker is considered ___________.

              A) joint supply

              B) joint demand

              C) derived demand

              D) competitive demand

    16.  All of the following are held to be a constant when thw supply curve of a product is drawn,

           except for the __________.

             A) state of technology

             B) price of the product

             C) number of producers

             D) price of production inputs used

     17.  Based on a survey, the income elasticity of demand for Sony MP3 players is 0.85. This shows             that Sony MP3 players __________.

             A) are luxury goods

             B) are normal goods

             C) have price elasticity of 0.85

             D) None of the above


     18.  A shift to either the left or right of a supply curve is called a change in _______.

             A) quantity demanded

             B) quantity supplied

             C) demand

             D) supply

    19.  When a consumer has the ability and wilingness to pay for a good, this is called _________.

             A) want

             B) law of demand

             C) demand

             D) desire


    20.  Movement along the demand curve for high rise apartments will be caused by a change in ___.

             A) Consumer's income

             B) Consumer's taste and preferences

             C) The price of the high rise apartments

             D) The price of single-storey link houses

   21.  Subsidies given to vegetables farmers will result in ___________ for vegetables.

             A) a shift in the supply curve

             B) a shift in the demand curve
             C) a movement along the supply curve

             D) a movement along the demand curve


  22.  If there is a surplus of product X, we can predict that _________.

             A) the price of X will rise

             B) the price of X will decline

             C) fewer resources will be allocated to the production of X

             D) the SS curve will shift to the left and DD curve to the right, there by eliminating shortage


  23.  Which of the following statements is true about the equilibrium price?

             A) There are forces that will increase the price

             B) There are forces that will decrease the price

             C) There is no pressure on price to either increase or decrease

             D) Quantity supplied may exceed wuantity demanded, and vice versa


 24.  If the government fixes the price below the equilibrium price, we might expect ___________.

             A) an excess of supply in the market

             B) quantity supplied to exceed quantity demanded

             C) quantity demanded to be equal to quantity supplied

             D) the emergence of black markets as individuals try to take advantage of unexploited                               opportunities


 25.  The following are the characteristics of a market in equilibrium, except

             A) there is no excess

             B) there is no surplus

             C) there is a tendency for price to change

             D) quantity demanded is equal to quantity supplied

Elasticity (Week Five)

A measure of the responsiveness of a variable to a change in one of its determinants

There are four types of elasticity:
 
       A.  Price elasticity of demand
       B.  Income elasticity of demand
       C.  Cross elasticity of demand
       D.  Price elasticity of supply

 Price elasticity of demand

    
- Price elasticity of demand measure the responsiveness of the quantity demand due to change in its
  price.


 Formula :
         

Degree of a Price Elasticity of Demand

Income elasticity of demand

-Income elasticity of demand measure the responsiveness of changes in the quantity demand for a  product due to a change in income

                             

                                         

                                         


 Interpreted the value of income elasticity

Elasticity for normal goods                    -is a condition in which the quantity demand for product

                increase as income increase.

Elasticity for luxuries goods                   -is a condition in which as the income increase,the quantity

                                                                 demand for a product increase

Elasticity for giffen goods or inferior    -is a condition in which quantity demand for a product
goods                                                    decrease as income increase.

Elasticity for necessity goods                 -is a condition in which the quantity demand for a product                                                                    does not change

Extra notes :	Necessity goods  →zero income elasticity
	Normal goods  → value of elastic < 1

 Cross -price elasticity of demand

- Cross price elasticity of demand measure can be defines as the degree of responsiveness of quantity demanded of goods.

Interpreted the value of cross elasticity 

Value of elasticity	Relationship of goods
>0 (positive)	Substitutes
<0 (negative)	Complementary
>0, <1	Independence