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ASSESSMENT ITEM 1 ECON11026 PRINCIPLES OF ECONOMICS REQUESTED BY: ALISON MCGOVERN DUE DATE: 28 AUGUST 2006 WEIGHTING: 50% PREPARED BY: MICHEL SCHRECK STUDENT NUMBER: S0114795 Table of contents QUESTION 1A 3 QUESTION 1B 4 QUESTION 2A (1) 6 QUESTION 2A (2) 7 QUESTION 2A (3) 8 QUESTION 2B 8 QUESTION 3A 10 QUESTION 3B 13 QUESTION 4A 15 QUESTION 4B 21 QUESTION 5A 23 QUESTION 5B 24 QUESTION 6A 26 QUESTION 6B 27 Question 1a Demand and Supply Diagrams for bread 1. A rise in the price of wheat. We assume that wheat is an ingredient of bread. Therefore a rise in the price of wheat will lead to a leftward shift in supply of bread. We move along the demand curve to a new equilibrium of Pe2 and Qe2 where the price rises and the quantity demanded decreases. 2. A rise in the price of butter and margarine. We assume that butter and margarine are complements to bread. Therefore, we move along the supply curve to the new equilibrium of Pe2 and Qe2. A left shift of the demand curve will set the lower price equilibrium at Pe2 as well...

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