Collaborators:

@Brian CHEW Kar Weng

(brian.chew.2022@scis.smu.edu.sg)
@Cara TAN Qi Hui (cara.tan.2022@business.smu.edu.sg)
@ZHANG Xinya
(xinyazhang.2022@accountancy.smu.edu.sg)
@Elvis NG Shyun Wang
(elvis.ng.2022@business.smu.edu.sg)
@YUN Zhaoyi (zyyun.2022@economics.smu.edu.sg)
 Cara Ton QiHui
01470660 ENS919
Problem Set
#

9) Assuming New owns the car butdoes not dive the car (as
an
engineer),
driva=$7000 $1000
Engineer:$6000/month as Grab -

$6800/month.
=

Accounting profit =$,000/month more than if he was an

engineer.
Economic profit he
the profit if were
grab driver=$6000
=
an
engineer is a

minus $6000 (as a

grab dina)
$0.
=

i.
Accounting profit and economic
profit in this case are
necessarily
not

the same.

6) Now would have a $1000 loss, since he would be able to earn $1000
more as a
grab driven.

driver hence should

2) He earns more as a
grab vs
engines, he not
change,
a] Demand curve rightwards.
shifts

movement demand
3) Downward
along the cros

2) Demand came
rightwards.
shifts

a) leftward shiftofthe supply curve

6) Rightward shiftof the supply curve

2) Rightward shiftofthe supply curve,

4) Rightward shiftofthe supply curve.

a) An inelastic demand for coffee that demanded does not
means
quantity
respond strongly to
price changes.
&

Price a

vx

cty
a

b) of
theyare complimentarygood
rent
rise phiseor
in

2)
Pricy Priva

risah....."ap ->
3

aty C

Indastic Elastic

coffee in
general (in
industry/marketlevel)
would be less
elastic land) coffee
↓ham starbucks atbrand/product
- other contrasting boreages and
be easily substituted
cannot

teal energy drinks. Starbucks on the other hand can be

also
easig substituted for other brands starbucks ↑
is

quite expensive thealready,

so even asmall increase in
price
would decrease
quantity demanded
by lot,a
 pice* qty
S
3 aka spending
elasticity ofdemand (2p)
0
Price =

0.5
=

the good inelastic.

Since ID is
negative, is

Hence, price of
10%, 20=-0.5
(i)
a increase
would mean the quantity demanded
would only fall by 5%.

If we assume that
·Before demanded a
the price increase, gty
p/ =

price
·

the price in
After mare, itydemanded:02
price p2
=

k2 0.95Q)
=

P2 1.1
=
p1

↳ Total Consumer Expenditure

=new TCE-old TCE
(0.95a1)(1.)P1) (P1)(a))
=
-

[(0.95)(1) 1)(1)p)]Q)
=
-

= 0.045P)(Q)
: We can conclude thatthe total consumer
expenditures increased by 4.5%
 9) Fixed cost 28 =

Variable cost 0.5g =

0.059"
+

3) Af (20 0.59 0.0592)/q 0

+

0.5 +
0.059
=
+
+
=

AFC 10.
=

q
AVC =
0.5 + 0.059

a) AC is minimum when coincides with

it Mr.

0.59 0.5 2 0.59 0.1g

+
+ +
=

0.5
5 0.19
-
- =

20 -

01q2
=
0.59
0
0.1q2 0.59 20
=
- + +

=0
0.192 0.59 20-
-

9 20
=

d) p 3,mc (q=20):$10
Profit
=

3
=

3 0.5 0.1 Profit(q=25) p11.25

=
+ =

0.1q 2.5
=

25
g

When marketprice where

is
p= 3, the firm produces atthe
qty marginal
The firm produces
equals the marketprice. Atp is
units.
cost =
3, 9:25.

Since$11.25>
$10, the rational decision and should
owner is not
making a

produce at9:25 instead.

both the short &

2) Firm will operate in
long run because marketprice
p3
=

is above the minimum total cost.

average
VV 1,75:3
A
=

A0 =2.55/3
 0

a)
b)
02
Q3 -

02
6 DWL
2) Before:A +
B D
+

that
After:A
d) Before:C + E
Cotalsun
After;2 B
+

2) A E
+