8/7/2019 Xinyu Wu ASS 1 Economics

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Economic ASS1

Xinyu Wu Student no:2323

1. Explain why nations with high living standards and nations with lowliving standards face the problem of scarcity problem? If you won$1 billion in a lottery, would you escape the scarcity problem?

Nations with high living standards or low living standards are all facing the problem

of scarcity. Firstly, peoples wants are always greater than the available resource.Secondly, every country has an increasing population which leads to the raise of totaldemand. Thirdly, as the development of economic situation, customers have greater and greater purchasing power, and some specific change in peoples preference or habit may bring the scarcity problem as well. Lastly, nature disaster is unavoidablefactor, this situation may decrease the amount of available goods supplied in a marketand make scarcity problem more serious for some specific goods.

If I have won $1 billion in lottery, I would not escape the scarcity problem sincewealth is not directly relate with scarcity problem. Scarcity problem is dealing withpeoples want and available resource. Moreover, the lottery price may worsen thisproblem as I would demand more than I havent won this price. In addition, wants

from householders are always increasing and no one can one day feel enough andsatisfied. Such as, even one has own an airplane, he wants to travel faster with a better aircraft.

2. Explain the difference between microeconomics andmacroeconomics. Give examples of areas of concern to eachbranch of economics.

Microeconomics is generally the study of specific individuals and industry, also theinteraction of householders and firms within the market. For example, By analysingthe supply and demand, a company is trying to maximize the production using lower price strategy and be able to be competitive in the industry.

Macroeconomics is the field of economics that studies the behaviour of the economyas a whole but not just on specific business or industry. Macroeconomics includingthe factor of inflation, unemployment, Government budget and so on. For example, anincrease in inflation rate would cause the price of raw materials to raise and finallyaffect price of the product.

3. Which of the following decisions has the greater opportunity cost?Why?a) a decision to use an undeveloped lot in Tokyo for a car parkb) a decision to use a square kilometre in the Simpson Desert for

a service station

Option (a) has the greater opportunity cost.As Tokyo is a busy city with large population, every place should be used wisely. Theundeveloped lot can be used to build office building, shopping mall, and all any other services which can make far more profit than a car park. So the opportunity cost ishigh. On the other hand, Simpson Desert is a place with few people and the value isrelative low. It wont cost too much to build a service station there.

8/7/2019 Xinyu Wu ASS 1 Economics

2/2

Economic ASS1

Xinyu Wu Student no:2323

4. The following is a set of hypothetical possibilities for a nation:

Combination Motor cars (thousands) Lamb (1000 s of tonnes)A 0 10B 2 9C 4 7D 6 4 E 8 0

a) Plot the production possibility data . What is the opportunity cost of the first 20000 cars produced?

10000 tonnes of Lamb .

b) Label a point F inside the frontier . Why is this an inefficient point?Label a point G outside the frontier . Why is this an unattainable point?Why are points A to E all efficient points?

Because in Point F, there are resource left for producing more on eithergood . Once there is any waste in resource, it is an inefficient point .

In Point G, the firm does not have enough resource to produce thatmuch on either production . So the point is unattainable

Form Point A to E, all resource is used regardless of what the proportionis on allocation between Motor cars and Lamb . There is no resourcebeing wasted . Therefore, A and E are all efficient Point .

Motor cars(Thousands)

Lamb(1000s of tonnes)

0 4 7 9 10

8

6

4

2A

B

C

D

E

F

G