ECO0006 Economics for Managers

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ECO0006 Economics for Managers
Diploma in Banking and Finance
Diploma in International Business
October 2024
Continuous Assessment 1 (Individual Assignment: 50 marks)
30% of Final Grade

INSTRUCTIONS TO STUDENTS:

1. This assignment consists of THREE questions and 6 pages. Answer ALL questions.
2. Type your answers in a Word document using Times New Roman, font size 12 and submit via Canvas. Assignments submitted through other ways (e.g. through email or hardcopy to the lecturer) will not be accepted.
3. Diagrams may be drawn with a digital stylus or hand-drawn and uploaded as an image. All other parts of the answer that are NOT typed out will NOT BE GRADED.
4. Open your document in Canvas after upload to ensure that the document submitted is complete and in order.
5. Your submission should include a cover page that follows the following format:
Module Code & Module Name
Diploma Name
CA 1 (Individual Assignment)
Name
SIM Student Number
6. Do not type the questions into your submission.
7. Deadline: 23 October 2024 (Wednesday), 11 59am.
8. Be reminded that a one-day late submission is subject to a 20%-mark deduction. Submissions that are late by more than one day will NOT be graded.

9. CA1 is an individual assignment and should be worked upon independently. Any form of plagiarism and/or collusion will be penalised.

Important Note:

Students caught for Plagiarism and/or Collusion will be subjected to heavy penalties.

Plagiarism & Collusion

(extracted from Student Handbook)

3.7.2 Plagiarism/Collusion

Plagiarism is theft of intellectual property. It is a form of lying, stealing and mistreating others. Students are reminded that plagiarism is a serious offence subject to the Institute’s disciplinary procedures.

Plagiarism can mean any one of the following:

  • direct copying of phrases and/or passages without a reference and/or quotation marks;
  • paraphrasing another writer’s work in your written work without citing the reference;
  • making a direct reference to an author you have not read although you may have read about him. The correct way is to reference the secondary source you have actually read rather than referencing the original which you have not read;
  • copying the work of another student, in part or in whole;
  • handing an assignment that has already been submitted for assessment in the same or any other course.

Please note that it is also a disciplinary offence for students to allow their work to be plagiarised by another student.

A student found guilty of any of the above offences will render the student liable for disciplinary actions which may result in the voiding and adjustments to the continuous assessment grade, and may result in expulsion from the Institute.

Question 1 (10 marks)

The graph shows the production possibility curve of an economy that produces coffee and tea with a given amount of resources. Use the information given to answer the questions below.

(a) Calculate the opportunity cost incurred if the economy chooses to change its production from bundle A to B. Explain why this opportunity cost is incurred. (4 marks)
(b) If the economy chooses to change its production from bundle B to C, suggest a value for “X” and provide an appropriate explanation. (4 marks)
(c) Explain any ONE (1) factor that can enable the economy to produce 100 tons of coffee and 120 tons of tea. (2 marks)

Question 2 (20 marks)

(a) Use information from the passage to answer the questions below.

Diesel price hike a thorny issue for Malaysia’s durian seller

NIBONG TEBAL – Durian sellers, especially those from mainland Penang, are already feeling the pinch of transporting the fruit from Balik Pulau – no thanks to the diesel price increase.

Mr William Ang said the price hike will be difficult to bear: “To keep the durians fresh we must collect them daily. We can only do this by driving a pickup truck to the orchards and loading the fruits. ………..Variants such as the Black Thorn already cost RM85 per kg now. My customers will run away if I sold durians for more than RM100 per kg.”

Source: www.straitstimes.com, 14 June 2024

i) Identify and explain a factor of supply that will lead to a rise in the price of durians. Use a market diagram to aid your explanation. (4 marks)
ii) Deduce if the demand for durian is price elastic or price inelastic and explain why. (4 marks)
iii) Based on your answer to part (ii), use a demand diagram to illustrate and explain the price increase on the total revenue of durian sellers. (7 marks)
iv) If the price of durians rises from RM85 per kg to RM95 per kg causes the demand for jackfruit (a type of fruit) to rise from 80kg to 200kg, calculate the cross elasticity of demand between the two fruits. State the relationship between both fruits. (5 marks)
Question 3 (20 marks)

(a) The following diagram shows the average fixed cost (AFC) of a firm.

i) Explain why the AFC curve slopes downwards when quantity rises. (2 marks)
ii) Calculate the total fixed cost incurred when the quantity produced is 10. (2 marks)
iii) Calculate the average fixed cost incurred when the quantity produced is 15. (3 marks)

(b) The following table shows output and cost information of a perfect competition firm producing ceramic mugs. Use the information to answer the questions below and show all workings clearly.

Output
Total Cost
(TC)
Marginal
Cost
(MC)
0 140 -
20 200 3
40
2
60 260 1
80 320
100 480 8

(a) Calculate the missing variables and show all working. (4 marks)
(b) Calculate the average variable cost incurred by the firm if it produces 60 ceramic mugs. (3 marks)
(c) If the firm sells each ceramic mug at a price of $8, use the profit-maximising condition to find the optimal output of the firm and calculate the profit made at optimal output. Illustrate your answers on a relevant diagram. (6 marks)

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