General Instructions – PLEASE READ THEM CAREFULLY

• The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted.

Assignment Questions

Q1

Consider the market for orange juice. In this market, the supply curve is given by Q_S = 100P_J −20P_O and the demand curve is given by Q_D = 1000−150P_J +100P_C, where J denotes orange juice, O denotes Orange, and C denotes coffee.

1. Assume that P_O = 10 and P_c = 8. Calculate the equilibrium price and quantity in the Orange juice market. (1 mark)
2. Suppose that a poor harvest season raises the price of oranges to P_o = 15
3. Is it possible to reach a market equilibrium if the price of orange juice P_J remains unchanged? Why? How much quantity of orange juice will finally be exchanged on the market? (2 marks)
4. Find the market price necessary to restore equilibrium. Deduce the equilibrium quantity of orange juice. (2 marks)

• Draw a graph to illustrate your answers. (1 mark)

Answer:-

Q2

Suppose the price elasticity of demand for the market of mobile phones is 0.90.

1. If all mobile-phone companies simultaneously increased their prices, will total revenue in the industry increase or decrease? (1 mark)
   1. If a single mobile-phone company increased its price, would you expect the company’s total revenue to increase or decrease? Explain. (2 marks)
   1. Suppose that the price in the market is initially $10 and the quantity demanded is 100 units. If the price in this market increases by 10%, what will be the percentage change in the quantity demanded? (2 marks)

Answer:-

Q3

If you have SAR 50,000 to start a new business, you can earn 10 percent interest on money in a bank account.  Your business expenses are SAR 22,000 per year on rent, SAR 18,000 per year on supplies, and SAR 5,000 per year on part time help. As for your personal expenses, your apartment costs you SAR 12,000 per year and your personal bills are an extra SAR 6,000 per year. What is your opportunity cost of running the business? (4 marks)