Description

Micro Economics
Dec 2024 Examination
PLEASE NOTE: This assignment is application based, you have to apply what you
have learnt in this subject into real life scenario. You will find most of the information
through internet search and the remaining from your common sense. None of the
answers appear directly in the textbook chapters but are based on the content in the
chapter
Q1. Imagine you are part of a research team analysing the necessity of government
intervention in various economic systems. You have been asked to evaluate three
different economies and analyse how the level of government intervention affects
economic efficiency and overall welfare in each system, highlighting the various
potential benefits and drawbacks of government involvement? (10 Marks)
Ans 1.
Introduction
Government intervention in economic systems is a subject of ongoing debate among
policymakers, economists, and citizens. Economic systems vary widely, from highly
centralized command economies to minimally regulated free-market systems. Each system
requires varying levels of government involvement to address challenges such as resource
allocation, income distribution, and market failures. While proponents of government
intervention argue that it promotes social welfare and economic stability, critics contend that
excessive involvement can hinder efficiency and stifle innovation. This essay examines the
role of government intervention in three distinct economic systems: a command economy, a
mixed economy, and a free-market economy. By analyzing the impact of intervention on
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Q2(A) The country of Ecotopia has recently implemented policies aimed at promoting
environmentally friendly technologies. In particular, the government has introduced a
subsidy program for electric vehicles (EVs), providing significant tax breaks and
rebates for consumers who purchase these cars. Identify and explain your observation
as how Government policies (Subsidies and Tax Rebates), Technological advancement
and Increased gasoline prices can shift the demand curve. Specify clearly if the shift will
be rightward or a leftward shift. (5 Marks)
Ans 2A.
Introduction
Government policies, technological advancements, and market conditions significantly
influence consumer behavior and demand patterns. In the case of Ecotopia, the government’s
subsidy program for electric vehicles (EVs), combined with advancements in EV technology
and rising gasoline prices, has created an environment conducive to increased EV adoption.
These factors directly impact the demand curve for EVs, causing observable shifts that reflect
changing consumer preferences and market dynamics. This analysis explores how each factor
Q2(B) Imagine you are observing different scenarios in daily life where the satisfaction
or enjoyment from consuming more of the same product gradually decreases. Identify
at least three such examples that illustrate the law of diminishing marginal utility.
Additionally, consider whether there might be any cases where this principle does not
apply. Reflect on these exceptions, providing examples to support your view. (5 Marks)
Ans 2B.
Introduction
The law of diminishing marginal utility is a fundamental economic principle that states the
additional satisfaction or utility gained from consuming successive units of a product
decreases as consumption increases. This concept is observable in everyday life and
influences consumer behavior, pricing strategies, and resource allocation. While this principle
generally holds true, there are exceptions where marginal utility does not diminish as
expected. This discussion explores three examples of diminishing marginal utility and