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Assignment

Answer all the Questions. (Word Limit 1500-2000 words)

Question 1

(Total 30 Marks)

1. Explain the Law of Diminishing

A firm produces laptops at the following levels of production:

Workers	Total Product	Marginal Product	Average Product
0	0
1	25
2	50
3	80
4	105
5	125
6	140

• Complete the MP and AP(5 Marks)
• At what number of workers does diminishing returns begin? (5 Marks)

• Explain what happens to marginal and average product in this (12 Marks)

Question 2

(Total 30 Marks)

1. Explain the concept of price elasticity of (8 Marks)
2. Discuss the key determinants of elasticity and explain why some goods are more price elastic than others. Use real-world examples to support your answer. (10 Marks)
3. For each scenario, calculate the elasticity and explain its type:

• When the price rises from $120 to $150, the quantity demanded falls from 200 to 160
• The price of a good increases from $80 to $100. Quantity supplied increases from 400 units to 520 units.
• The price of Product A increases from $50 to $60. As a result, quantity demanded of Product B increases from 150 units to 195 units.
• The price of Product X falls from $25 to $20. As a result, quantity demanded of Product Y increases from 100 units to 115 units. (8 Marks)
• “Price elasticity of demand is the most important concept in pricing ” Discuss this statement, using theory and real-world examples. (12 Marks)

Question 3

(Total  30 Marks)

The table below shows the supply and demand for solar panels per month:

Price per unit	Monthly Supply	Monthly Demand
$400	150	350
$500	200	300
$600	250	250
$700	300	200
$800	350	150
$900	400	100

1. What is the equilibrium price and quantity in this market? Explain your (5 Marks)
2. Suppose a new government subsidy increases supply by 100 units at every price Calculate the new equilibrium price and quantity and explain why the direction of the price change makes intuitive sense. (5 Marks)
3. Using real-world examples from 2026, analyse the impact of dynamic pricing in an industry of your choice:

• Explain how dynamic pricing adjusts to supply and demand, with specific examples of pricing changes during peak hours in major cities in 2026. (10 Marks)
• Discuss the economic rationale behind its use and its effects on consumer and producer surplus. Support your analysis with specific data and examples.  (10 Marks)