Economic Principles

_____________________________________________________________ BEO1105 Economic Principles Assignment: Semester 2, 2012 DUE: Week beginning the 10th of September, 2012 Value: 20% of Total Assessment * Since the assignment forms a part of the final assessment for the subject, no assistance will be provided by the staff in relation to answers to the questions. However, if you need any clarifications in regard to the questions, you may contact the lecturer/tutor. You should attach the duly completed Assessment Declaration form available in the Assessment Information section of the subject Web site (WebCT). * You should comply with the assignment presentation requirement as outlined in the subject guide. * The assignment must be typed with a maximum of 600 words in total. * The completed assignment must be lodged with your tutor during your scheduled tutorial in the week it is due. ___________________________________________________________________________ Question 1 (9 marks)During the 1 990s, technological advance reduced the cost of computer chips. Explain, with the use supply and demand diagrams, how the following markets are affected in terms of prices and quantities. (a) Computers (3 marks) (b) Computer software (3 marks) (c) Typewriters (3 marks) Question 2 (6 marks) After an economics lecture one day, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. a) In what sense is taxing food is a ‘good’ way to raise revenue? (3 Marks) (b) In what sense is it not a ‘good’ way to raise revenue? (3 Marks) Question 3 (5 marks) Most studies of firms’ long run costs have found that average costs decline as firms produce increasingly larger output levels (economies of scale), such as for automobile firms. However, trucking (haulage) firms appear not to experience falling average costs associated with large-scale operations. Why might this be the case? Explain