Ssu 1231 - Principles of Economics 1

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SSU 1231 : PRINCIPLES OF ECONOMICS 1

1.Write about a decision you had to make when you had to choose between several activities that    you wanted to do. Answer the following questions based on what you wrote.

a) What did you choose?

b) What was the opportunity cost?

c) Explain why you had to make a decision?

Every human being has wants and needs to be fulfilled. Wants are unlimited and cannot be fulfilled. Meanwhile the resources are limited depending on the person’s economic stability. Scarcity erupts when unlimited wants meet limited resources. ‘Economics is the study of choice under condition of scarcity. ‘Scarcity is the utmost important key factor of economics; therefore, our choices become limited.

Once, after school while returning back home, I had to purchase the following items with 2000/ (limited resource)- in my hand.

five books priced 40*5 =200/-

medicines for my mother              350/-

Utility bills                            1300/-

Finally thought of travelling by a three-wheeler since it was a long day, but the balance I had didn’t convince me to travel by three-wheeler since I had 150/- balance. Therefore, I had to sacrifice my want in order to reach my destination (need). So, I let go the idea of travelling by three-wheeler and reached home by bus.

1. I choose the alternative bus transport to reach home.
2. I had to lose the three-wheeler ride – opportunity cost
3. I had to take this decision because my want was greater than the resource I had to spend. So, I had to sacrifice a want of mine, in other terms my opportunity cost was the three-wheeler ride.

4)

a) A store owner finds that customers are willing to pay more for umbrellas on rainy days.[pic 1]

[pic 2]

P[pic 3][pic 4]

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• Upward shift in demand curve as the customers are willing to pay more for the umbrellas. So, the demand increases

b) When XYZ Telecom, a long-distance telephone service provider, offered reduced rates on weekends, the volume of weekend calls increased sharply.[pic 11][pic 12][pic 13][pic 14][pic 15][pic 16][pic 17][pic 18][pic 19][pic 20][pic 21][pic 22][pic 23][pic 24][pic 25][pic 26]

• Reduce rate of the service provider increases the demand. Therefore, there will be a shift in the demand curve.

c)People buy more long-stemmed roses during the week of valentine’s day, even though the prices are higher than at other times of the year.

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