Micro Economics

Essay by SiHigh School, 12th grade February 2004

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Micro Economics Assignment 2

With the aid of supply and demand diagrams, carefully explain:

a.Why the price of tomatoes fluctuates more than the price of tinned soup

b.how a substantial increase in labour productivity in the computer production industry might affect:

1-the price and output of computers

2- the price and output of scanners

c.The possible effects of price and output of coal when demand and supply decrease (i.e shift) over the same time period.

d.Why the prices of houses in the uk increased on average by 12% in 2000 even though the supply of houses increased by around 200000 home

e.How an increase in rail fares (caused by spiralling rail track repair costs) will affect the price of national coach fares between London and cities in the north of England

a. Prices of tomatoes will fluctuate due to the changes in seasons. When in season the price of tomatoes will be pretty stable, it is most likely to meet equilibrium.

Whereas when out of season the price for the commodity will increase due to a shortness in supply. This can be overcome by importing tomatoes or increasing the price of them to lower the demand, importing goods can be expensive though.

Tinned soup on the other hand is a manufactured preseavable good that can be stored, therefore if demand increased in the winter, market supply can be added to by reducing stocks.

The demand exceeds supply in the summer for tomatoes but will contract when the seasons come around to winter. It should reach equilibrium in the spring. This causes the variation in price.

Whereas tinned soup should stay at equilibrium all year round.

b.Computers and Scanners are complementary goods; if the labour productivity in the computer industry has an increase then the...