Microeconomics.

Microeconomics

1 .1 . If we can all have everything we want in unlimited quantities then the study of economics is moot . Scarcity simply means that there is not enough to go around for everybody and that players in a market will have to sacrifice as they prioritize one economic activity over the other Firms cannot produce all quantities and all products at a given price and consumers have to choose purchasing one product over the other with their limited budgets

1 .2 . Opportunity cost arises when an individual firm or person makes

an economic choice between two or more options . Opportunity cost is the cost of the path not taken . Put another way , opportunity cost is what the individual has forgone - the second , third and succeeding options - in his or her choosing of the first option

1 .3 . Even without a decrease in production of the second good , there is still opportunity cost . The opportunity cost would be the loss in increase in production of the second good should we have instead poured our resources in increasing the production of good two instead of good one

1 .4 . The demand curve gives the quantity of a good people want at a given price . It reflects consumer attitudes . Movement along the demand curve would mean a change in the price of a good and as such , the quantity demanded for that good by the market would change . This is because consumers have no control over the price of the goods , meaning that price is the input to the demand schedule . A shift in the demand curve would mean a change in the attitudes of the consumers . The quantity they would demand at a given price would change

1 .5 . The law of supply and demand has the following prerequisites First , that both consumers and suppliers have their own price and quantity schedules . Suppliers would produce increasing quantities of a good as its price increases . Consumers would buy less of a good as its price increases . That said , the law of supply and demand tells us that in a market with competition , the market price and market quantity of a product would be at the point wherein at that price , the quantity produced by the supplier and the quantity bought by the consumer is equal . This is at the intersection of the supply and demand schedules

The market will tend to go towards this equilibrium price . A price below equilibrium would result in a shortage and the demand outpacing supply will tend to increase the market price as consumers outbid ' one another . If the price goes above equilibrium price , then suppliers are making more products than consumers want - a surplus - and as a result they will reduce prices to sell off the excess product . We can see then that the price will really tend to rally around the equilibrium price

2 .a . The opportunity cost of 20 cakes changes depending on the level of cake and tractor production . If we were originally...