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EC139 Principles of Microeconomics Assignment Example NUI Galway Ireland

Microeconomics is a branch of economics that deals with the production, distribution, and consumption of goods and services. Microeconomics is often seen as a study of markets. This includes a number of principles that can be applied to any type of decision-making process. This course will introduce you to the basic concepts and principles of microeconomic theory. You’ll learn how these ideas are used in practice, with real-world applications that come from all over.

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Get individual assignment answers for EC139: Principles of Microeconomics

In this course, there are many types of assignments given to students like individual assignments, group-based assignments, reports, case studies, final year projects, skills demonstrations, learner records, and other solutions are given by us.

Upon completion of this course, the student should be able to:

Assignment Activity 1: Understand economics as social science and its scientific method of inquiry

Economics is the study of how people use scarce resources to satisfy their unlimited needs and wants. It’s a social science because it deals with human behavior. It’s a scientific discipline because it employs the scientific method of inquiry, which is a systematic way of asking and answering questions.

The scientific method of inquiry is used to test hypotheses and theories about how people behave in different scenarios. The scientific method of inquiry includes the following steps:

  1. Define a question or problem
  2. Gather information that will help you solve the problem
  3. Develop a hypothesis to answer your question
  4. Test your hypothesis using collected data and statistical analysis
  5. Draw conclusions from collected data and analysis, then provide support for the explanation

Assignment Activity 2: Use, appreciate and recognize core principles of microeconomics

There are a number of core principles in microeconomics that help to explain how markets work. These principles include:

  1. Supply and demand: This principle states that the quantity of a good or service that is available and the demand for that good or service will determine the price of the good or service in the market.
  2. Marginal analysis: This principle states that a decision should be evaluated based on the additional benefits received from a marginal increase or decrease in one of its factors.
  3. Opportunity cost: This principle states that the cost of a choice is what you give up by making that choice. The opportunity cost of your choice is the value of the second-best choice you passed on when making your decision.
  4. Elasticity: This principle states that when something is easily substituted or when supply or demand changes, the quantity of a good or service demanded or supplied will change by more than normal.
  5. Scarcity and choice: This principle states that people face trade-offs when they make decisions because resources are scarce. This means that every choice has a cost, and the cost of a choice is what you give up by making that choice.
  6. Price determination: This principle states that the price of a good or service is determined by its equilibrium price. The equilibrium price of a product is determined by the market forces of supply and demand, which determine how much people are willing to pay for it.
  7. Market structures: This principle states that the product price in a market is determined by supply and demand, which are influenced by both government policies and industry structure. The four main types of industrial structures are perfect competition, monopolistic competition, oligopoly, and monopoly.

Assignment Activity 3: Develop an understanding of markets, demand, supply, and the market economy

Markets

The markets that we generally discuss refer to the market for a single product also referred to as a commodity. In this market structure, firms have complete control over prices and production levels.

In most countries there are three main types of markets:

Primary markets: These markets connect sellers with buyers directly or indirectly through a mediating agent. Some examples of primary markets include:

  • Farmers selling their crops to a local buyer
  • Manufacturers selling goods and services directly to consumers and firms
  • Companies selling their products in an initial public offering (IPO) to the public

Secondary markets: These markets connect buyers with sellers who are not participating in the primary market. Some examples of secondary markets include:

  • The stock market, where buyers purchase shares of ownership in a company from sellers
  • The bond market, where buyers purchase debt instruments from sellers
  • The foreign exchange market, where buyers and sellers exchange different currencies

Tertiary markets: These are the markets that connect buyers and sellers who are not involved in the primary or secondary market. Some examples of tertiary markets include:

  • A used car dealer selling a vehicle from an individual to another individual
  • A company outsourcing their work to a third party

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Demand

Demand is the amount of a product or service consumers are willing to buy at a given price. The demand curve is a graphical representation of the demand for a product. It shows how the quantity demanded changes as the price changes.

The law of demand says that all other things being equal, when the price of a good increase, the quantity demanded decreases and vice versa. The higher the price of a good, the lower the quantity demanded.

An increase in demand moves the demand curve to the right, and a decrease in demand moves it to the left. The factors that cause an increase or decrease in demand are summarized below:

  1. Price of related goods: If the price of a substitute or complementary good changes, this change will affect your decision to buy the good in question. For example, if the price of beef increases, then the quantity demanded for chicken will increase.
  2. Income: An increase in income usually leads to an increase in demand for most goods and services. This is because people have more money to spend and are able to buy more products.
  3. Tastes and Preferences: Consumer tastes and preferences can change over time, which will cause demand for a particular good to change. For example, the demand for organic food has increased in recent years as people have become more health-conscious.
  4. Population changes: If the population of a country increases, then the demand for goods and services will also increase. For example, an increase in the population of Canada will result in greater demand for housing and medical care services.
  5. Expectations: If people expect to see an increase in price, they are more likely to buy the good now rather than later. For example, if it is expected that gas prices will rise tomorrow morning due to a hurricane, people will be more likely to fill up their tanks today.

Supply

Supply is the amount of a product or service producers are willing to sell at a given price. The supply curve is a graphical representation of the supply for a product. It shows how the quantity supplied changes as the price changes.

The law of supply says that all other things being equal, when the price of a good increases, the quantity supplied will increase, and vice versa. An increase in supply moves the supply curve to the right, while a decrease in supply moves it to the left. The factors that cause an increase or decrease in supply are summarized below:

  1. Price of related goods: If the price of a substitute or complementary good changes, this will affect your decision to produce the good in question. For example, if the price of corn increases, then the quantity supplied of corn flakes will decrease.
  2. Technology: Improvements in technology can increase supply by making it more efficient to produce goods and services.
  3. Costs of production: Increases in the cost of production (e.g. wages, raw materials, energy) will lead to an increase in the price of the good and a decrease in the quantity supplied.
  4. Weather: Extreme weather conditions (e.g. floods, droughts) can disrupt production and cause supply to decrease.
  5. Regulations: Changes in government regulations can affect the amount that producers are willing to supply. For example, the introduction of new environmental regulations can lead to an increase in the cost of production and a decrease in the supply of certain goods.

Market Economy

The market economy is a system where Economic decisions are made by individuals and businesses that seek to maximize their profits. In a market economy, prices are determined by the interaction of supply and demand.

Economists assume that in a free and competitive market economy:

  1. Firms set prices so that they earn zero economic profit.
  2. Firms produce the quantity of output at which their marginal cost equals their marginal revenue, which is the market price for the good or service multiplied by the quantity of output produced.
  3. Consumers decide how much to buy based on their willingness and ability to pay, taking prices as given.
  4. The allocation of resources is efficient, meaning that the quantity of goods and services produced is the best possible given the available resources.
  5. Markets are clear, which means that the quantity of a good or service demanded is equal to the quantity supplied at each price.

The market economy is a system where buyers and sellers interact to produce and exchange goods and services. In a market economy, prices are determined by the forces of supply and demand, and resources are allocated based on people’s willingness and ability to pay for them.

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Assignment Activity 4: Understand costs, production, and market structures

In a market economy, prices are determined by the interaction of supply and demand. In order to understand how this works, we need to understand the concepts of cost, production, and market structures.

Cost

Cost is what you have to give up in order to get something else. The cost of a good or service is the amount of money you have to pay to get it. The cost of production is the amount of money it costs to produce a good or service. The costs of producing a good or service include fixed costs, variable costs, and opportunity costs.

  • Fixed costs are expenses that do not change when the quantity produced changes, such as rent on property used to produce goods.
  • Variable costs are expenses that depend directly on the number of units produced, such as raw materials and labor.
  • Opportunity costs are the highest-valued alternative that is forgone when a decision is made, such as the profit that could be earned by selling a good instead of producing it.

Production

Production is the process of making goods and services. Production can be divided into two categories: primary and secondary production.

  • Primary production is the production of raw materials, such as mining, forestry, and fishing.
  • Secondary production is the transformation of raw materials into finished goods, such as manufacturing and construction.

Market structures

Market structures are the different ways in which markets can be organized. The four most common market structures are a monopoly, oligopoly, monopolistic competition, and perfect competition.

In a monopoly market structure, there is only one producer of a good or service. In an oligopoly market structure, there are only a few producers of a good or service. In monopolistic competition, there are many producers of a good or service, but they all produce similar products. And in perfect competition, there are many producers of a good or service, and they produce different products.

Monopoly

  • The market structure is where there is only one producer of a good or service. A monopoly produces the quantity of output at which its marginal cost equals its marginal revenue, which is the market price for the good or service multiplied by the quantity of output produced.
  • The main sources of monopoly power are exclusive control over a necessary resource, government licensing or franchise, and patents and copyrights.

Oligopoly

  • The market structure where there are only a few producers of a good or service. In an oligopoly market structure, firms set prices so that they earn zero economic profit.
  • The main sources of oligopoly power are economies of scale, product differentiation, and collusion.

Monopolistic Competition

  • The market structure where there are many producers of a good or service, but they all produce similar products.
  • In monopolistic competition, firms produce the quantity of output at which their marginal cost equals their marginal revenue, which is the market price for the good or service multiplied by the quantity of output produced.

Perfect Competition

  • The market structure is where there are many producers of a good or service, and they produce different products.
  • In perfect competition, firms produce where MR = MC, which is the market price for the good or service, minus the marginal cost of producing an extra unit of output.

Assignment Activity 5: Analyse various microeconomic issues and problems

Microeconomic issues and problems can include anything from market saturation to monopolies and price gouging. In essence, microeconomic issues are those that affect the individual business or consumer. Some common microeconomic problems include:

  • Market saturation: When a market is saturated, there is no more room for new businesses to enter and compete. This can lead to monopolies or oligopolies.
  • Price gouging: When a supplier charges an excessively high price for a good or service during a time of crisis, this is known as price gouging.
  • Monopoly power: When a business has the power to control prices, in both a downward and upward direction, this is known as monopoly power.
  • Price discrimination: Charging customers different prices for the same product, depending on their willingness to pay.
  • Externalities: Negative side-effects caused by the consumption, leading to market inefficiency (ie; air pollution).

Assignment Activity 6: Develop an understanding of formal models and techniques used in economics

Formal models and techniques used in economics include mathematical models, statistical models, and game theory.

Game theory: The study of strategic decision-making. Game theory is commonly used in economics and political science to analyze the actions and interactions of individuals and how they affect their opponent’s choices, resulting in different outcomes. For example, when firms engage in oligopolies, such as price competition or non-price competition (exclusionary practices), game theory can be used to understand the different strategies being employed and how they impact the market.

Mathematical models: Mathematical models are a way to represent economic theories in a more precise way. By using mathematics, economists can understand the relationships between different factors in a more rigorous way. For example, supply and demand curves can be graphed on a coordinate plane to show how price and quantity relate.

Statistical models: Statistical models use data collected from the real world to construct relationships that can be compared with other similar data sets. By collecting, organizing, and analyzing large amounts of data, statisticians are able to test theories about the data set they have created. For example, regression analysis can be used to understand how one variable (e.g. price) impacts another variable (e.g. quantity).

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