pls. find attached for the questions.thank you.

GHANA INSTITUTE OF MANAGEMENT AND PUBLIC ADMINISTRATION (GIMPA)

MASTERS PROGRAMME IN BUSINESS ADMINISTRATION

2017/2018 ACADEMIC YEAR

BUSINESS ECONOMICS ASSIGNMENT

Due: 19st December 2017

Instruction: Answer All Questions

Question 1 (30 marks)

1. The inverse demand functions of two towns for a product are given as, and . Find the market demand of these two towns 5 marks

2. The supply and demand functions for a product are defined as, and

1. Find the equilibrium price and quantity 5 marks

1. Sketch a graph to show the results in i) above 5 marks

2. Assume the equilibrium price is 80 pesewas (P=0.80) and find the PES and PED associated with a small increase in price from the current price of 80 pesewas.

10 marks

1. What is the incidence of a unit tax of Ghs 0.60 imposed on the producer?

5 marks

Question 2 (30 Marks)

1. To reduce the violence associated with the narcotics drug trade in many Latin American countries leaders of some of these producing countries suggested legalizing the production and use of narcotics. According to these leaders legalizing these drugs will drastically reduce the huge profit associated with the trade, and eliminate market/turf wars between suppliers. Illustrate (graphically) and explain what will happen to the market price and drug consumption levels if this policy suggestion is adopted? Do you think adopting this policy is a good idea? 15 marks

1. Explain the concept of rationality in economics. Does assumption of rationality hold in the real world as well? 15 marks

Question 3 (20 marks)

The general demand function for good A is

where is quantity demanded of good A each month, is price of good A, M is

average household income, is price of related good B, is price consumers expect to pay next month for good A

a. Interpret the intercept parameter in the general demand function. 5 marks

b. interpret the slope of the price of good A. 5 marks

c. Interpret the slope parameter for income. Is good A normal or inferior? Explain. 5 marks

d. Are goods A and B substitutes or complements? Explain. Interpret the slope parameter

for the price of good B. 5 marks

Question 4 (20 marks)

1. If a good is given to a consumer free of charge, what is the opportunity cost associated with this good? What is the opportunity cost associated with a good that is there in abundance (no scarcity problem associated with the good) 10 marks

2. An entrepreneur spent 50,000 cedis to employ labour and buy materials for production. The entrepreneur could have earned 6000 cedis working for another company. If he recorded revenue totaling 57,000 cedis, determine the economic cost of the business. Also determine the economic profit of this firm. Is it a good idea for this entrepreneur to remain in self employment? 10 marks