ECONOMIC

INDIVIDUAL ASSIGNMENT

Course Code: LMEd1111

NAME ID
1.Wendiye Gebre------------------------CLE/UW35780/16

Submitted to:- Atlabachew

2016 E.C

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 INTRODUCTION
Economics is the study of how societies allocate scarce resources to produce, distribute, and
consume goods and services. It is a social science that examines how individuals, businesses,
and governments make choices and interact with each other in economic systems.

At its core, economics is concerned with understanding and explaining how people make
decisions in their economic lives. It seeks to understand why people and firms behave the way
they do in response to incentives, and how those decisions impact the overall economy.

Microeconomics, as a branch of economics, analyzes individual economic agents such as

consumers, households, and firms. It explores how individuals make decisions regarding the
allocation of their limited resources, such as what goods to buy, how much to save, and how to
allocate their time. Microeconomics also examines how firms make production decisions, how
they determine prices, and how they interact in markets.

Macroeconomics, on the other hand, examines the overall performance of the economy as a
whole. It focuses on economic aggregates such as total output (GDP), unemployment rates,
inflation, and economic growth. Macroeconomists study factors that influence these
aggregates, such as government policies, fiscal and monetary policy, and international trade.

Economics relies on various theories, models, and concepts to explain and predict economic
phenomena. These include supply and demand analysis, cost-benefit analysis, game theory, and
economic indicators. Economic models are used to simplify complex economic systems and
make predictions about their behavior.

Economics also has practical applications in policy making. Governments and policymakers use
economic analysis to develop strategies for economic development, income redistribution, and
stability. They rely on economists' recommendations to make decisions about tax policies,
regulations, and monetary policies.

Overall, economics is a vital field of study that provides insights into the workings of economies
and helps inform decision-making at individual, business, and government levels. By
understanding the principles of economics, we can gain a better understanding of how societies
create and distribute wealth, make efficient use of resources, and improve overall well-being.

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 1. What are the common accepted definitions of economics?

There are several commonly accepted definitions of economics, but here are three main ones:

1. Economics as the study of scarcity and choice: This definition focuses on the fundamental
concept of scarcity, which means there are limited resources to satisfy unlimited human wants
and needs. Economics studies how individuals, businesses, and governments make choices to
allocate resources and distribute goods and services.

2. Economics as the study of production, consumption, and distribution: This definition

highlights the three main activities in an economy. Economics analyzes how goods and services
are produced (production), how they are consumed by individuals and households
(consumption), and how they are distributed among various sectors of the economy
(distribution).

3. Economics as the study of human behavior and decision-making: This definition emphasizes
the behavioral aspect of economics. It studies how individuals and groups make rational and
irrational choices in order to maximize their satisfaction and well-being. Economics also
examines the incentives and constraints that influence decision-making.

These definitions provide a broad understanding of the scope and purpose of economics,
covering areas such as resource allocation, production, consumption, distribution, and human
behavior.

2. Why does the study of economics?

The study of economics is important for several reasons:

1. Understanding how economies work: Economics helps us understand how individuals,

businesses, and governments make decisions and interact within an economy. It provides
insights into the functioning of markets, the role of prices, and the factors that influence
economic growth and development.

2. Making informed decisions: Economics equips individuals with the analytical tools and
knowledge to make informed decisions, both as consumers and producers. It helps individuals
evaluate trade-offs, understand the costs and benefits of different choices, and make rational
decisions to maximize their well-being.

3. Policy-making and government decisions: Economics plays a crucial role in shaping economic
policies and government decisions. It provides policymakers with the tools to analyze and
assess the potential impact of policy interventions on the economy. Economics also helps
governments understand how to address issues such as poverty, unemployment, inflation, and
inequality.

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4. Understanding global and national economies: Economics provides a framework for
understanding and analyzing the global and national economy. It helps us understand the
factors driving economic growth, trade patterns, international relations, and how changes in
the global economy can affect individual countries.

5. Predicting and managing economic trends and cycles: Economics helps to forecast and
manage economic trends and cycles. It allows economists to analyze indicators such as GDP,
inflation, employment rates, and interest rates, to understand the state of the economy,
identify potential risks, and develop strategies to manage economic fluctuations.

Overall, the study of economics provides valuable insights into how individuals and societies
make choices and allocate resources. It has practical applications in personal decision-making,
policy-making, understanding the global economy, and managing economic fluctuations.

3. What are the main differences between microeconomics and macroeconomics?

Microeconomics and macroeconomics are two branches of economics that focus on different
aspects of the economy. Here are the main differences between the two:

1. Scope: Microeconomics studies the behavior of individuals, households, and firms in making
economic decisions. It focuses on the analysis of small-scale economic units, such as individual
consumers and producers. On the other hand, macroeconomics examines the behavior of the
overall economy and aggregates such as GDP, inflation, and unemployment. It looks at the
economy as a whole and analyzes the broader economic issues and phenomena.

2. Perspective: Microeconomics takes a bottom-up approach by examining the individual

choices and interactions that drive economic outcomes. It focuses on understanding the factors
that influence the supply and demand of specific goods or services, the pricing mechanisms,
and the allocation of resources. Macroeconomics, on the other hand, takes a top-down view
and focuses on the aggregate behavior of all participants in the economy. It looks at factors like
overall economic growth, inflation, and unemployment rates.

3. Level of analysis: Microeconomics analyzes specific markets or industries to understand the

behavior of individual actors and how they respond to price changes, incentives, or changes in
market conditions. It looks at concepts such as supply and demand, production and costs,
market efficiency, and market structures. Macroeconomics, on the other hand, analyzes the
economy as a whole and examines issues like overall economic output, aggregate consumption,
investment, and government spending.

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4. Policy focus: Microeconomics provides insights into the behavior of individual actors and how
their choices impact the allocation of resources. It helps in making decisions on topics such as
pricing strategies, production decisions, and resource allocation within firms. Macroeconomics,
on the other hand, focuses on policy issues that affect the entire economy. It helps in
formulating and analyzing policies related to fiscal and monetary interventions, economic
stability, and economic growth.

In summary, microeconomics deals with individual economic units and specific markets, while
macroeconomics looks at the overall economy and aggregates. Microeconomics focuses on
individual choices and interactions, while macroeconomics looks at the economy as a whole
and policy implications.

4. What positive economics and normative economics?

Positive economics and normative economics are two approaches used in economics to
analyze and evaluate economic issues:

1. Positive economics: Positive economics is concerned with describing and explaining

economic phenomena as they are, without making value judgments or prescribing what
should be. It focuses on objective analysis and uses data and evidence to understand
how the economy functions. Positive economics aims to offer causal explanations and
predict the effects of economic actions or policies. It provides a framework for
understanding the cause-effect relationships in the economy and is grounded in facts
and empirical evidence.

2. Normative economics: Normative economics, on the other hand, involves making

value judgments and assessing economic issues from a moral or ethical perspective. It
deals with subjective opinions and prescribes what ought to be done in the economy.
Normative economics is concerned with questions of fairness, equity, and social welfare.
It involves making policy recommendations based on personal beliefs or societal values.
Normative statements in economics are often influenced by social and political values
and can vary across individuals or societies.

In summary, positive economics focuses on objective analysis and explaining economic

phenomena using empirical evidence, while normative economics involves subjective
value judgments and prescribes what should be done based on ethical or moral
considerations. Positive economics seeks to understand the world as it is, while
normative economics seeks to address how it ought to be.

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 5. What do you understand by positive economics and normative economics?

Positive economics is an approach in economics that seeks to describe and explain economic
phenomena as they are, without making value judgments. It focuses on objective analysis, uses
data and evidence, and aims to provide causal explanations and predict the effects of economic
actions or policies. Positive economics is grounded in facts and empirical evidence.

Normative economics, on the other hand, involves making value judgments and assessing
economic issues from a moral or ethical perspective. It deals with subjective opinions and
prescribes what ought to be done in the economy. Normative economics is concerned with
questions of fairness, equity, and social welfare. It involves making policy recommendations
based on personal beliefs or societal values. Normative statements in economics are often
influenced by social and political values and can vary across individuals or societies.

6. Definition the terms of scarcity, choice and opportunity costs

Scarcity refers to the limited availability of resources in comparison to unlimited wants and
needs. It implies that there is not enough of a resource to fulfill everyone's desires, resulting in
individuals, businesses, and societies having to make choices.

Choice refers to the decision-making process of selecting one option over others. It is a
fundamental concept in economics driven by scarcity, where individuals and societies must
prioritize their limited resources to satisfy their most urgent needs and wants.

Opportunity cost refers to the value of the next best alternative that is forgone when making a
choice. It represents the benefits or profits that could have been gained by choosing an
alternative option. In other words, opportunity cost is the cost of what is given up in order to
choose a particular option. It highlights the trade-offs involved in decision-making and reflects
the value of the foregone opportunity.

7. What is a production possibility curve?

A production possibility curve (PPC), also known as a production possibility frontier (PPF), is a
graphical representation of the different combinations of two goods or services that an
economy can produce given its available resources and technology. It shows the maximum
output that can be produced by an economy when all resources are fully utilized and efficiently
allocated.

The PPC typically depicts two goods or services on its axes, with one representing the quantity
of one good/service and the other representing the quantity of the other good/service. The
curve itself shows the various combinations of the two goods/services that can be produced,
given the available resources and technology.

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The PPC is concave or bowed outward, which reflects the concept of increasing opportunity
cost. This means that as an economy produces more of one good/service, it must give up
increasingly larger amounts of the other good/service. This is because resources are not equally
suited for producing all types of goods/services, so reallocating resources from one activity to
another leads to diminishing returns.

The points on the PPC represent productive efficiency, as they maximize the use of available
resources. Points inside the curve represent inefficiency, as resources are not fully utilized.
Points outside the curve are currently unattainable given the economy's resources and
technology. The PPC can also shift outward over time as an economy experiences economic
growth through factors like technological advancements or increases in available resources.

8. What are the basic problems/questions in economy? Their problems

The basic problems/questions in economics revolve around the allocation of scarce resources
to fulfill unlimited wants and needs. These problems can be broadly categorized into three main
questions:

1. What to produce: This question pertains to the allocation of resources towards the
production of different goods and services. It involves determining which goods and services
should be produced and in what quantities. This allocation is based on factors such as consumer
demand, resource availability, technological feasibility, and societal priorities.

2. How to produce: This question concerns the most efficient and cost-effective methods of
producing goods and services. It involves decisions about the combination of resources to be
used, the technologies to be employed, and the production techniques to be adopted. The aim
is to maximize output while minimizing costs and waste.

3. For whom to produce: This question relates to the distribution of goods and services among
individuals and groups in society. It involves deciding who gets access to the produced goods
and services and in what quantities. This distribution can be influenced by factors such as
income levels, wealth inequality, social welfare programs, and government policies.

These questions form the basis of economic analysis and decision-making in both individual and
collective contexts. Economists and policymakers aim to find optimal solutions to these
problems in order to promote efficiency, equity, and overall economic well-being. However,
finding the best answers to these questions is often complex and can vary across different
economic systems and societies.

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 9. List and explain economic system and their characteristics

The basic problems/questions in economics revolve around the allocation of scarce resources
to fulfill unlimited wants and needs. These problems can be broadly categorized into three main
questions:

1. What to produce: This question pertains to the allocation of resources towards the
production of different goods and services. It involves determining which goods and services
should be produced and in what quantities. This allocation is based on factors such as consumer
demand, resource availability, technological feasibility, and societal priorities.

2. How to produce: This question concerns the most efficient and cost-effective methods of
producing goods and services. It involves decisions about the combination of resources to be
used, the technologies to be employed, and the production techniques to be adopted. The aim
is to maximize output while minimizing costs and waste.

3. For whom to produce: This question relates to the distribution of goods and services among
individuals and groups in society. It involves deciding who gets access to the produced goods
and services and in what quantities. This distribution can be influenced by factors such as
income levels, wealth inequality, social welfare programs, and government policies.

These questions form the basis of economic analysis and decision-making in both individual and
collective contexts. Economists and policymakers aim to find optimal solutions to these
problems in order to promote efficiency, equity, and overall economic well-being. However,
finding the best answers to these questions is often complex and can vary across different
economic systems and societies.
10. List and explain the three decision making units in a closed economy
10. List and explain the three decision making units in a closed economy

In a closed economy, there are three decision-making units that play a fundamental role in the
functioning of the economy. These units are:

1. Households: Households consist of individuals and families who own resources, such as
labor, land, and capital. They play a critical role as suppliers of labor and consumers of goods
and services. Households make decisions about how much labor to supply and how much of
their income to spend on consumption, saving, or investment. They also make decisions about
what goods and services to consume based on their preferences and budget constraints.

2. Firms: Firms are entities that combine resources, such as labor, capital, and raw materials, to
produce goods and services. They aim to maximize profits by efficiently producing output and
selling it in the market. Firms make decisions regarding the level of production, the type of
goods or services to produce, the allocation of resources, and the pricing of their products.
They also make decisions about hiring workers, investing in new technologies, and managing
their finances.
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3. Government: The government is an important decision-making unit in a closed economy. It
plays a crucial role in providing public goods and services, enforcing laws and regulations, and
ensuring economic stability. The government makes decisions related to fiscal policy (taxation
and government spending), monetary policy (interest rates and money supply), and regulatory
policies. It also intervenes in the economy to address market failures, redistribute income, and
promote economic growth and development.

These three decision-making units interact with each other in the economy through various
markets, such as the labor market, product market, and financial market. Their decisions and
actions collectively determine the production, consumption, and distribution of goods and
services in the closed economy.

11. What is demand? What is law of demand?

Demand refers to the quantity of a good or service that consumers are willing and able to buy
at various prices during a specific period. It reflects the relationship between price and quantity
demanded, as well as the various factors that influence consumer buying decisions.

The Law of Demand states that, ceteris paribus (all other things being equal), there is an inverse
relationship between the price of a good or service and the quantity demanded. In other words,
as the price of a good or service increases, the quantity demanded decreases, and vice versa.
This relationship is represented by the downward-sloping demand curve.

The Law of Demand is based on several factors that underlie consumer behavior:

1. Income Effect: When the price of a good or service decreases, consumers' real income
increases because they can buy more of the good or service with the same amount of money.
This leads to an increase in quantity demanded.

2. Substitution Effect: When the price of a good or service increases, consumers may switch to
alternative, less expensive goods or services. This leads to a decrease in quantity demanded.

3. Diminishing Marginal Utility: As individuals consume more of a good or service, the additional
satisfaction they derive from each additional unit diminishes. This means that consumers are
willing to pay a lower price for additional units, resulting in a decrease in quantity demanded as
price increases.

4. Consumer Preferences: Consumers have different preferences and tastes, which can impact
their willingness to buy a good or service. If the price of a good or service increases, consumers
may choose to buy less or switch to substitutes.

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The Law of Demand plays a crucial role in understanding consumer behavior and market
dynamics. It helps explain why prices and quantities vary for different goods and services and
guides producers in making decisions regarding pricing and production levels.

12. What are the reasons behind the downward slope of demand curve?

The downward slope of the demand curve is a graphical representation of the Law of Demand,
which states that there is an inverse relationship between the price of a good or service and the
quantity demanded. There are several reasons behind this downward slope:

1. Income Effect: When the price of a good or service decreases, consumers' purchasing power
increases. This means they can afford to buy more of the good or service with the same amount
of money. As a result, the quantity demanded increases.

2. Substitution Effect: When the price of a good or service increases, consumers tend to switch
to alternative, less expensive goods or services. This is because the higher price makes the
original good or service relatively less attractive compared to its substitutes. This leads to a
decrease in the quantity demanded.

3. Diminishing Marginal Utility: As individuals consume more of a good or service, the additional
satisfaction or utility derived from each additional unit diminishes. This means that consumers
are willing to pay a lower price for additional units. As the price increases, the quantity
demanded decreases because consumers are not willing to pay as much for each additional
unit.

4. Consumer Preferences: Consumers have different preferences and tastes, which can impact
their willingness to buy a good or service. If the price of a good or service increases, consumers
may choose to buy less or switch to substitutes that they perceive as being more attractive or
affordable.

These factors collectively contribute to the downward slope of the demand curve. As the price
of a good or service decreases, consumers' purchasing power increases, leading to higher
quantity demanded. Conversely, as the price increases, consumers' purchasing power
decreases, leading to lower quantity demanded.

13. What are the factors affecting individual demand?

There are several factors that can affect individual demand for a particular good or service.
These include:

1. Price: The price of a good or service is the most significant factor affecting individual demand.
As the price increases, consumers generally tend to demand less of a good or service, and vice
versa.

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2. Income: A change in income can have a significant impact on individual demand. When
income increases, consumers typically have more disposable income, which can lead to an
increase in demand for normal goods. Conversely, a decrease in income can lead to a decrease
in demand.

3. Preferences and Tastes: Individual preferences and tastes can influence demand. Consumers'
personal preferences, cultural influences, advertising, and trends can all impact their desire for
a particular good or service.

4. Availability of Substitutes: The availability of substitutes can affect individual demand. If

there are easily accessible substitutes for a good or service that offer similar benefits at a lower
price, consumers may switch to those substitutes, reducing the demand for the original good or
service.

5. Complementary Goods: The demand for a good may also be influenced by the availability
and price of complementary goods. Complementary goods are goods that are typically used
together. For example, the demand for cars may be influenced by the availability and cost of
gasoline.

6. Expectations: Consumer expectations about future prices, income, or other factors can also
impact individual demand. For example, if consumers expect the price of a good to increase in
the future, they may increase their demand for it in the present.

7. Demographics: Factors such as age, gender, occupation, and location can influence individual
demand. Different demographic groups may have different preferences, income levels, and
needs, which can affect their demand for certain goods or services.

These factors can vary from person to person and can affect individual demand in different
ways. Some factors may have a stronger influence than others, depending on the specific
context and circumstances.

14. What is law of supply?

The law of supply states that, all else being equal, the quantity supplied of a good or service will
increase as its price increases, and vice versa. In other words, there is a positive relationship
between price and quantity supplied. This is because producers are motivated to supply more
of a good or service at higher prices, as it provides them with greater profits.

The law of supply is based on the assumption that other factors affecting supply, such as input
costs, technology, and government regulations, remain constant. If these factors change, the
entire supply curve can shift, leading to a different relationship between price and quantity
supplied.

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The law of supply plays a central role in determining the equilibrium price and quantity in a
market. It is an essential concept in economics, as it helps explain how suppliers respond to
changes in market conditions and how markets reach equilibrium.

15. What are the factors that determine supply of a commodity?

The factors that determine the supply of a commodity include:

1. Price of the commodity: As mentioned earlier, the price of a commodity is the most
important factor that affects the supply. When the price of a commodity increases, producers
are more willing to supply more of the commodity to the market.

2. Cost of production: The cost of production is another important factor that affects the supply
of a commodity. If the cost of production increases, producers may be less willing to supply the
commodity to the market.

3. Technology: Advancements in technology can increase the efficiency of production, which

can lower the cost of production and increase the supply of a commodity.

4. Availability of raw materials: The availability of raw materials can also affect the supply of a
commodity. If the raw materials required for production become scarce or expensive, it can
limit the supply of the commodity.

5. Government policies: Government policies such as taxes, subsidies, and regulations can
affect the supply of a commodity. For example, subsidies can encourage producers to increase
supply, while taxes can discourage production and reduce supply.

6. Number of producers: The number of producers in a market can also affect the supply of a
commodity. More producers can increase competition, which can lead to an increase in supply.

16. What is consumer and utility?

Consumer refers to an individual or entity that purchases goods or services for personal use or
consumption. Consumers play a crucial role in the market economy as their demand for goods
and services influences production and pricing decisions.

Utility, on the other hand, refers to the satisfaction or usefulness that individuals derive from
consuming goods or services. Utility is a subjective concept, meaning it varies from person to
person and can be influenced by individual preferences, needs, and circumstances. Economists
often measure utility in terms of the satisfaction or happiness that a consumer experiences
from consuming a particular good or service. Utility can be thought of as the level of satisfaction
or benefit that a consumer obtains from acquiring or using a product.

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 17. Write the difference between total utility and marginal utility

Total utility refers to the overall satisfaction or benefit that a consumer derives from consuming
a certain quantity of a good or service. It reflects the sum total of the utility obtained from each
unit of the good consumed. Total utility tends to increase with the consumption of each
additional unit, but at a diminishing rate.

On the other hand, marginal utility refers to the additional satisfaction or benefit that a
consumer obtains from consuming an additional unit of a good or service. It represents the
change in total utility that occurs as a result of consuming one more unit of the good. Marginal
utility tends to decrease as consumption increases, reflecting the law of diminishing marginal
utility.

In summary, total utility reflects the overall satisfaction from consuming multiple units of a
good or service, while marginal utility measures the additional satisfaction gained from
consuming one additional unit.

18. Write assumptions of cardinal and ordinal utility

The assumptions of cardinal utility and ordinal utility are as follows:

Assumptions of Cardinal Utility:

1. Quantifiability: Cardinal utility assumes that the level of utility can be measured or quantified
using a specific scale.
2. Interpersonal Comparability: It is assumed that utility can be compared and aggregated
across different individuals. This assumption allows for the possibility of comparing the utility
levels of different consumers.
3. Additivity: Cardinal utility assumes that the utility obtained from consuming multiple goods
or services can be added together to obtain the total utility.

Assumptions of Ordinal Utility:

1. Ranking: Ordinal utility assumes that individuals can rank their preferences for different
goods or services. It does not require assigning specific numerical values to utility levels.
2. Monotonicity: It is assumed that consumers always prefer more of a good or service to less.
That is, the utility derived from consuming more of a good is always greater than or equal to
the utility derived from consuming less.
3. Indifference: Ordinal utility theory assumes that individuals can be indifferent between two
or more consumption bundles. This means that individuals can derive the same level of utility
from different combinations of goods or services.

It is important to note that ordinal utility is considered to be a more realistic and widely
accepted approach in modern economic analysis, as cardinal utility is often considered to be
difficult to measure or compare across individuals.

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 19. Write properties/features of indifference curve

The properties/features of indifference curves are:

1. Downward sloping: Indifference curves slope downwards from left to right, indicating that as
the quantity of one good increases, the quantity of the other good must decrease to maintain
the same level of utility.

2. Convex to the origin: Indifference curves are convex to the origin, which means that the rate
at which a consumer is willing to trade one good for another decreases as the quantity of the
good being traded increases.

3. Non-intersecting: Indifference curves do not intersect, which means that a consumer cannot
be indifferent between two bundles of goods that provide different levels of utility.

4. Indifference map: A set of indifference curves represents an indifference map, which shows
all possible combinations of two goods that provide the same level of utility to the consumer.

5. Higher indifference curves represent higher levels of utility: Indifference curves that are
further away from the origin represent higher levels of utility, and a consumer will always
prefer a bundle of goods on a higher indifference curve than on a lower one.

6. Slope of indifference curve represents marginal rate of substitution: The slope of an

indifference curve represents the marginal rate of substitution (MRS), which is the rate at which
a consumer is willing to trade one good for another while maintaining the same level of utility.

20. Write factors in change in the budget line and explain it.

The budget line represents the various combinations of two goods that a consumer can
purchase given their income and the prices of the goods. Any change in income or the prices of
the goods will result in a shift or rotation of the budget line. Some factors that can cause a
change in the budget line are:

1. Change in income: An increase in income will cause the budget line to shift outward, allowing
the consumer to purchase more of both goods at the same prices. A decrease in income will
cause the budget line to shift inward, limiting the amount of both goods that can be purchased.

2. Change in the price of one good: An increase in the price of one good will cause the budget
line to rotate inward, making it more difficult for the consumer to afford that good. A decrease
in the price of one good will cause the budget line to rotate outward, making it easier for the
consumer to afford that good.

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3. Change in the price of both goods: A simultaneous increase or decrease in the prices of both
goods will cause the budget line to rotate, but the effect on the consumer's purchasing power
will depend on the relative magnitude of the price changes.

4. Change in tastes and preferences: A change in tastes and preferences can cause a shift in the
consumer's demand for one or both goods, which will in turn affect their optimal consumption
bundle and the shape of their budget line.

5. Change in technology: A technological innovation or improvement can affect the production

costs and prices of one or both goods, which will affect the consumer's purchasing power and
the shape of their budget line.

Overall, any change in income, prices, tastes, preferences, or technology can cause a shift or
rotation in the budget line, which will affect the consumer's optimal consumption bundle and
their ability to purchase different combinations of goods.

21. Answer is
To find the equilibrium price and quantity in a free market, we set the quantity demanded
equal to the quantity supplied and solve for the price.

Setting Qd = Qs, we have:

1400 + 70P = 1600 - 30P

To solve for P, we can combine like terms:

100P = 200

P=2

So the equilibrium price in the free market is SR 2 per kg.

To find the equilibrium quantity, we can substitute the equilibrium price back into either the
supply or demand equation. We will use the demand equation:

Qd = 1400 + 70(2)

Qd = 1400 + 140

Qd = 1540

So the equilibrium quantity in the free market is 1540 kg.

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Now let's consider the case where P = 30. We can substitute this value into the demand
equation to find the quantity demanded:

Qd = 1400 + 70(30)

Qd = 1400 + 2100

Qd = 3500

So at a price of P = 30, the quantity demanded is 3500 kg.

To find the quantity supplied, we can substitute this value into the supply equation:

Qs = 1600 - 30(30)

Qs = 1600 - 900

Qs = 700

So at a price of P = 30, the quantity supplied is 700 kg.

In this case, the quantity demanded (3500 kg) is greater than the quantity supplied (700 kg), so
there is excess demand in the market. This could result in shortages and potentially higher
prices as buyers compete for limited supply.

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 SUMMARY
They all generally refer to the study of how individuals,
businesses, and governments allocate resources to satisfy their
needs and wants. Economics is often categorized into two main
branches: microeconomics and macroeconomics. Microeconomics
focuses on the behavior of individuals and firms, analyzing how
they make decisions regarding production, consumption, and
pricing. Meanwhile, macroeconomics looks at the overall
functioning of the economy, including factors such as inflation,
unemployment, and economic growth. Economics also involves
the study of various theories, models, and concepts to understand
and predict economic phenomena. It plays a crucial role in
informing policy decisions, as governments and policymakers rely
on economic analysis to develop strategies for economic
development and stability. Overall, economics is a
multidisciplinary field that combines elements of social science,
mathematics, and statistics to provide insights into the
production, distribution, and consumption of goods and services
in society.

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