The supply schedule shows how much quantity a supplier will produce at different price levels based on the supply curve. The quantity supplied can be affected by factors like production costs, technology, prices of inputs and other goods, government policies, and producer expectations. An improvement in technology or a decline in input prices can increase supply by lowering costs.

1. ©Al Tareeqah Management Studies - 2019 1
Managerial Economics
SBS – MBA / MSC
Assignment – KUW 2019
STUDENT ID
UNIT TITLE Managerial Economics UNIT CODE ECO 502
GENERAL INSTRUCTIONS
 All assignments are to be submitted on 7th March2019
to examinationboard@atmsedu.org and cc to afatima@atmsedu.org.
 Hardcopy submissions to be done on 8th March 2019
 If assignment is not submitted on date, will follow with penalty of 10% deduction of marks for every
day.
 Similarity between students work is strictly not accepted, any student found with similar work will be
graded Zero and fail for the course. However, Plagiarism is an academic offence and will not be tolerated
under SBS
 Assignment once submitted to exam board is final for marking.
PRESENTATION OF ASSIGNMENT
 You should include a title page and list of contents.
 Use headings and sub-headings to organize your report and include supporting material in the
document file.
 Number all pages sequentially.
 Any published material you refer to should be properly referenced and included in a reference list at
the end of your assignment (see Plagiarism notice overleaf).
Total Marks 90
1 8 1 1 1 7 2
ame (in Full) Suzan Anton Safadi

2. ©Al Tareeqah Management Studies - 2019 2
SECTION “A”
Answer the below questions. Each question carry 10 marks. 50 Mark
1- Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the
equilibrium quantity of each of the followingevents.
a. The market for newspapers in your town
Case 1: The salaries of journalists go up.
In the diagram below, the journalists are the main material of producing the newspapers and
any changes in their salaries affects the quantity supplied. Increasing salaries decreases the
quantity supplies at the same price. There will be a leftward shifting of the supply curve from
Sa to Sb. What will lead to another result which is dropping in the equilibrium quantity and
increase in equilibrium price.
Case 2: There is a big news event in your town, which is reported in the newspapers.
People will purchase more newspaper to read about the big news event in town at any offered
price. This will shift rightwards affecting the demand curve and causing change from Da to Db.
Also there will be increase in both the equilibrium price and quantity and it will shift as well from
Ea to Eb.

3. ©Al Tareeqah Management Studies - 2019 3
b. The market for St. Louis Rams (a professional football team) cottonT-shirts
Case 1: The Rams win the Super Bowl competition.
Of course, people will buy the St. Louis Rams T-shirt after their success in winning the
competition so the demand will increase at the offered price. This will shift rightwards affecting
the demand curve and causing change from Da to Db. Also there will be increase in both the
equilibrium price and quantity and it will shift as well from Ea to Eb as shown below
Case 2: The price of cotton increases.
There is cost here which is the cotton of the t-shirts sovany changes in the price of it will lead to
change in quantity supplied. In this case the increase in the price of the cotton will cause decrease
in the manufacture of the t-shirts and reduce the quantity supplied. On the diagram below it shows
a leftward shifting of the supply curve from Sa to Sb. what will also lead to a drop in the
equilibrium quantity and increase in equilibrium price. below it is represented as the changes from
Ea to Eb.
c. The market for bagels
Case 1: People realize how fattening bagels are.

4. Nowadays people get more healthier and aware what will lead to decrease in the demand. Resulting a
shift in the the left side so the demand curve will change from D1 to D2 and that will also affect in
decreasing the equilibrium price and quantity and it will change from E1 to E2 as shown below.
Case 2: People have less time to make themselves a cooked breakfast.
When people doesnt have time to prepare for their breakfast and starts choosing alternatives,
bagles will be a most common option which will increase the demand on it. It shift to the right
side on the demand curve from D1 to D2. Also there will be raise in both the equilibrium price
and quantity from E1 to E2 as shown below.
d. The market for the Krugman and Wells economics textbook
Case 1: Your professor makes it required reading for all of his or her students.
As it’s required, Students will need to buy the textbook with no option so the demand on the
Krugnan and wells textbook will increase. The demand curve will shift to the right side and
change from D1 to D2. This will also raise the equilibrium price and quantity and it will shift
from E1 to E2 as shown below

5. Case 2: Printing costs for textbooks are lowered by the use of synthetic paper.
As the cost of printing will reduce, the publisher will offer more copies for sale at the same price.
This will increase the supply so the curve will shift from S1 to S2 to the right side. On the other
hand the equilibrium price will fall and the equilibrium quantity will increase from E1 to E2.

6. 2- Explain the features of Perfect Competition with examples.
The number of buyers and sellers in the market is very large. These buyers and sellers compete among
themselves. Due to the large number, no buyer or seller influences the demand or supply in the market.
For example: Agricultural markets are examples of nearly perfect competition as well. Imagine shopping
at your local farmers' market: there are numerous farmers, selling the same fruits, vegetables and herbs....
And we also can take another example currency market; foreing exchange market, here currency is all
homogeneous, traders will have access to many different buyers and sellers.
Perfect competition is a market structure in which the following five criteria are met:
1. All firms sell Identical products; The grocery store is an excellent example. For example, often
there is soda by the checkout and soda in the drinks isle as well. Often the soda by the checkout is
easily twice as expensive. You can say the same thing about chocolate, gum etc. Within the produce
section, many people pay a premium for packaged salad when the ingredients are right in front of
them. In some cases, fruit/vegetable are sold both loose and packaged at different prices, or sliced
vs. un-sliced as well
2. Single price; all units of the product have a uniform price which is determined by the market
3. All firms are price takers; they cannot control the market price of their product
4. Perfect knowledge; All the buyers and sellers have perfect knowledge of the market and the prices
charged by each firm
5. Freedom of market entry and exit; whenThere are no barriers to entry and exit in the market
6. Any firm can enter or exit the market any time it wants
3- Explain graphically, at what point the firm should stop hiring worker in a perfect competitive market
form. Also, list down some of the characteristics of the market form.
When the firm's marginal profit from hiring an additional worker equals the cost of hiring that worker.
As pointed in the below diagram.

7. At optimal workers usage, firms hire the amount of workers for which marginal revenue is equal to cost
of labor (wage). If labor brings in revenue more than its costs, the worker should be hired. Conversely, if
the cost of additional labor is higher than the additional revenue the worker adds, that worker should not
be hired.
In economics, market form describes the state of a market with respect to competition.
The major market forms are:
 Perfect competition: there are many numbers of buyers as well as many numbers of sellers.
 Monopolistic competition, also called competitive market: there are a large number of independent
firms. Each firm has a very small proportion of the market share.
 Oligopoly: A market is dominated by a small number of firms which own more than 40% of the market
share.
 Monopoly: There is only one seller and many number of buyers.
4- Demand of a product is usually very sensitive to economic variables, such as the prices and consumer
income. This responsiveness of demand is elasticity. Compute elasticity in the below scenarios:
a. Yesterday, the price of envelopes was $3 a box, and Jacky was willing to buy 10 boxes. Today, the
price has gone up to $3.75 a box, and Jacky is now willing to buy 8 boxes. Is Jacky's demand for
envelopes elastic or inelastic? What is Jacky's elasticity of demand?
To find Jacky’s elasticity of demand, we need to divide the percent change in quantity by the percent
change in price.
% Change in Quantity = (8 - 10)/(10) = -0.20 = -20%
% Change in Price = (3.75 - 3.00)/(3.00) = 0.25 = 25%
Elasticity = |(-20%)/(25%)| = |-0.8| = 0.8
Her elasticity of demand is the absolute value of -0.8, or 0.8. Jacky’s elasticity of demand is inelastic,
since it is < 1.
b. Katy advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more.
She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that
the elasticity of demand is constant, how many would she sell if the price were $10 a box?
To find the elasticity of demand, we need to divide the percent change in quantity by the percent change
in price.
% Change in Quantity = (40 - 50)/(50) = -0.20 = -20%
% Change in Price = (6.00 - 4.00)/(4.00) = 0.50 = 50%
Elasticity = |(-20%)/(50%)| = |-0.4| = 0.4
The elasticity of demand is 0.4 (elastic).
To find the quantity when the price is $10 a box, we use the same formula:
Elasticity = 0.4 = |(% Change in Quantity)/(% Change in Price)|
% Change in Price = (10.00 - 4.00)/(4.00) = 1.5 = 150%

8. before taking the absolute value, elasticity was -0.4, so we use -0.4 to calculate the changes in quantity,
in order not to end up with a big increase in consumption, instead of a decrease!
-0.4 = |(% Change in Quantity)/(150%)|
|(%Change in Quantity)| = -60% = -0.6
-0.6 = (X - 50)/50
X = 20
The new demand at $10 a dozen will be 20 dozen cookies.
5- A market failure occurs when the supply of a good or service is insufficient to meet demand. This results
in an inefficient distribution of resources among market participants. Hence government need to
intervene to bring efficiencies. Explain any four tools available for government interventions to deal
with the market failures with suitable examples.
1. Government ownership of business enterprises one of the most important market failure holders
and ways that many countries get involve with protecting their market and especially focusing on the
natural monopolists within the market. Government ownership of business enterprises is mainly a
mixed organization established of different facilities in order to reach the main goal. They are basically
dealing as they are private organizations that apply the government regulations and the same time
avoids the commercial services. In addition they try to prove themselves in market as private company
and willing to create profit and take place in market competition. It is important to note that this
organization is controlled by the government and at the same time it has its own legal existence from
the government. The main reason why this organization is establish can be covered as, ensuring that
some provided services for people are effectively managed and organized to meet their needs as they
believe it is not truly managed properly by the private sector. Also the government business enterprise
is being maintained in order to create that some important companies survive in markets and especially
the monopolist companies as the barriers are high in it and not any company can hold on so the GBE
maintain its satiability.
2. Direct Controls or Regulation usually governments create some of regulations and controls on
different firm in order to control them within the circle that all works to protect and support the market.
The main cause and reason why governments choose to establish controls and regulations as key to
prevent the market failure issue is because it is the only tool to track the externalities.
Applying can easily be with small example; applying some regulations and law on industries that their
pollution exceed the globally allowed amount may face them to pay fines as they will be causing
global warning and effecting the environment in negative way. In different government it is generally
agreed that not having compliance polices to protect and show respect to the social responsibility and
prevent it from failure.
3. Subsidy Policy The objective of such subsidies is to encourage private providers to expand
production of the good or service to the socially optimal level. A subsidy means the government pays
part of the cost. For example, the government may give farmers a subsidy of £10 for every kilo of
potatoes. The effect is to shift the supply curve to the right, leading to lower price and higher quantity
demanded

9. In this case, the government is giving a subsidy of £14 (30-16). The subsidy shifts the supply curve to
the right. It leads to a lower market price. Price falls from £30 to £22. Quantity demand increases from
100 to 140
4. Tax policy Taxes on negative externalities are intended to make consumers/ producers pay the full
social cost of the good. This reduces consumption and creates a more socially efficient outcome.
If a good has a negative externality, without a tax, there will be over-consumption (Q1 where
D=S) because people ignore the external costs.
A tax should be placed on the good equal to the external marginal cost. It means that consumers will end
up paying the full social marginal cost. If the external costs of driving a car are estimated at 2p per mile,
this is how the tax on petrol should be calculated. A tax enables the harmful effects to be internalised.
After the tax is implemented, the output of the good will fall from Q1 to Q2. Q2 is socially efficient
because at this level the social marginal benefit (SMB) = Social marginal cost (SMC).
For Example: the tax on tobacco:
Increasing tax will lead to a fall in demand, although this may only be a small effect because demand is
price inelastic. People are addicted and there are no close substitutes.
Cigarettes are a demerit good, therefore, consumers may underestimate the costs of smoking – e.g. they
ignore the damage to their own health; this is a reason to try and stop people smoking.
Also, smoking has many negative externalities like passive smoking. Therefore, the social cost is greater
than the private cost; if the social cost is greater than the present price, social efficiency can be increased

10. by making smokers pay the true social cost. A tax shifts the supply curve to the left causing a fall in
demand this is more socially efficient because at Q2, SMC=SMB.

11. SECTION “B”
Answer the below questions. Each question carry 20 marks.
1) Answer the following:
a. Discuss briefly the supply schedule and the various factors affecting the supply in the market.
Supply schedule is a chart that shows how much product a supplier will have to produce to meet
consumer demand at a specified price based on the supply curve. In other words, it’s basically a
supply graph in spreadsheet form listing the quantity that needs to be produced at each product
price level.
This concept is particularly important for businesses because they must understand what happens to
their inventory and units sold as the sales price changes. For example, the supply curve shows us
that an increase in the selling price of a good will increase the business’ willingness to produce the
good. Thus, management can look at the schedule and plan what price they will market the product
in the market and how many units they will need to produce at that price point. This sound simply,
but it’s fair from that. The quantity supplied can be affected by several factors including political
conditions of the country where the supplier operates, production costs, climatic conditions
affecting the supply of product, prices of substitute and complementary products.
The factors that may cause changes in or affect the supply of a product in the market place should
include:
 Production technology: an improvement of production technology increases the output. This lowers
the average and marginal costs, since, with the same production factors, more output is produced.
 Prices of production factors: a rise in the price of one or more production factors leads to an
increase in the production costs and vice versa.
 Prices of other products: the supply of a product may be influenced by the prices of other products,
especially if the products are complementary.
 Number of production units: as the number of production units increases, the total supply of a
product increases and vice versa.
 Government policies: when taxes increase, the quantity supplied decreases because the cost of
production increases. When subsidies increase, the quantity supplied increases because the cost of
production decreases.
 Expectations of producers: if producers expect a rise in the price of a product, they are likely to
lower the quantity supplied and wait until the price goes up to sell the product at a higher price.
 Random, natural, and other factors: the supply of agricultural products is influenced by natural
phenomena and the weather conditions. Other factors affecting supply can be extended strikes,
floods, political instability etc.
b. Assume the demand being perfectly inelastic, and supply suddenly doubles due to innovative
technique of production. Illustrate in a well labelled graph, the changes in the equilibrium price,
and quantity, and also is it advisable to do so from supplier point of view.

12. When demand is perfectly inelastic the change in supply does not affect the equilibrium
quantity. It only changes the equilibrium price.
In the diagram, when supply get double due to innovative technique of production, the supply curve
shifts from SS toS1S1. Demand Curve DD is a vertical straight-line parallel to Y axis. Due to
increase in supply the new equilibrium is established at point E1. Equilibrium price falls from OP to
OP1 but the equilibrium quantity remain same at OQ as demand is perfectly inelastic
Yes, it is advisable to do so from supplier point of view because technological improvement reduce
the cost of production and it will shift the supply curve to right causing a greater quantity is to be
produced at any given price
2) The Telecommunications Regulatory Authority (TRA) is the UAE’s independent industry
regulator. Since its launch in 1976, Etisalat has held a monopoly in the market. That changed in
2006 with the emergence of du, which was awarded a 20-year concession to operate fixed-line,
wireless, internet and international telecoms services. UAE-based telecom operator recently
announced that it was launching Virgin Mobile as a new telecom brand within the country.
Assuming the trend continues and the government opens the market for more private and foreign
players. You are required to –
a. Apply your understanding and concepts from microeconomics, to investigate and summarize the
major characteristics of the emerging market form in the telecom industry.
Emirates Telecommunications Corporation which is called Etisalat, was the exclusive
telecommunication supplier in the UAE. Etisalat utilized the opportunity of offering free zones
developments to the total UAE and make out of it full control on the telecommunication market.
By this Etisalat established its own Monopoly on the telecommunication business. Not for ever, as
after several years another company came to the market and the Monopoly turned to duoply that is
also providing mobile services and internet in UAE and finally it turned into triple play and third
company came up in market.

14. b. Describe and analyze the pricing policies that you would expect to find in this industry
Total revenue and price elasticity, the importance of testing the changes in price as it has great
effect on the total revenue. It is important to highlight that the price elasticity differ from level to
another and as result it has on the firm demand curve. In addition as per the Monopoly strategy, they
also choose to pick prices that are in the elastic point in the demand curve.
Below is clear example on monopoly firm, where the below formula is applied on the schedule no.1
which represents the demand, elasticity and total revenue. The monopoly firms revenue curve is
given in part (B) . Usually monopolist firms works on decrease the price of per unit in order to in
increase the sales. It is not slandered to have the sales increasing as cause of the changes in the
outcomes costs. As per the below case , we can see that the greatest total revenue is reachable in the
part that there is 5 units sold out in price of 25$ and important notice that anything extra than the 5
units will automatically cause decline in the total revenue.
Q= Quantity
P= price per unit
As there is obvious negative
pattern between the marginal
revenue cost and the elasticity and
in the zero marginal revenue the
demand is in the point at the elastic
price, we can see that there is
another relationship based between
the demand curve and the price
elasticity. In the point or the
negative marginal revenue we can
see that the firm will stop
producing any extra unit as the
monopoly firms always work on
the positive marginal revenue.
c. Explain the profit maximization strategy of this market form with the help of a suitable graph.
The firm continues producing units of the goods as long as the marginal revenue of these
goods in generating extra amount of money than the marginal cost. For that reason always
the profit maximization behavior of any firm is basically based on the marginal rule.
The main goal for any firm is to reach the profit minimization point, and at that specific point
the cost is also being calculated based on the sense of economist that is relaying on the future
opportunity. The below figure 2, shows how the monopoly firm deals with the demand curve
and marginal revenue.
Q=10-p

15. Figure no. 2
In order to let’s check figure number 2 where we can see that the at the point where both the
marginal revenue and the marginal cost cross at the quantity QM is where we find out the
profit maximization at the price of PM. At that the Point E are the outcomes resulted.
Three main points that helps to find out the monopoly profit maximizing price and outcomes.
1- Figuring out the demand, marginal cost and the marginal revenue.
2- Then we should decide the output point where it will be represented by the point that the
marginal cost and the marginal revenue cross.
3- Deciding the point where that outcome can be sold and that could be found out from the
demand curve price given.
After finalizing the 3 main point and finding out the price and outcomes of the monopoly
firm, we can read the economic welfare by adding the average total cost. (Figure no.3)
Figure no 3