Assignment 1 consists oftwo short answerquestions (worth5 marks each)based on Text material. Before...

Question

Assignment 1 consists oftwo short answerquestions (worth5 marks each)based on Text material. Before attempting this assignment you are expected to have read Textchapters 1, 2, 3 and 4. Sources used in your answer should be fully referenced in APA 6th style.

Answer the following questions ensuring that you apply economic principles or theory related to (a) the concepts of supply and demand forQuestion 1 and (b)the conceptsof specialisation and exchange for Question 2to inform your analysis and support your decisions.Communicate your ideas with correct grammar, spelling and writing style and support your answers with diagrams as necessary.

Question 1 (5 marks)

Explain the concept of the price elasticity of demand and provide examples where understanding the nature of the price elasticity of demand has been important in the decision making of a firm.

Question 2 (5 Marks)

Explain the concepts of comparative advantage and absolute advantage and provide examples of situations in which countries have ignored the principle of comparative advantage to their cost.

David · Accepted Answer

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Student’s Name - RishabhAgarwal
University Name - CharlesSturt University
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Question 1 (5 marks)
Explain the concept of the price elasticity of demand and provide examples where understanding the nature of the price elasticity of demand has been important in the decision making of a firm. Answer – The concept of price elasticity of demand simply means the responsiveness of change in demand of a good due to change in its price. It signifies the flexibility with which the demand of a good can be altered. There are various factors which affect the price elasticity of demand. These include the nature of the commodity, the share of the good’s expenditure in total budget of the consumer, the number of substitutes available in the market, the postponement of the consumption of the good, current level of price of the good, and number of uses to which that good can be out to usage. Understanding the price elasticity of demand is important to take decisions of the firm because in case the demand of the product is highly sensitive to the change in the prices,

Assignment 1 consists oftwo short answerquestions (worth5 marks each)based on Text material. Before attempting this assignment you are expected to have read Textchapters 1, 2, 3 and 4. Sources used in...

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