Economic Principles


aWhat is the economic problem and how is it related to the concept of opportunity
cost 2 Marks

b-Reflect on an occasion this week where the concept of opportmity cost applied to
you. 1 Mark

c.What is the difference between normative and positive statement? Give an example
of each of these statements that you have used before- Do not use the examples in
power point slides discussed in class. 2 + 1 =3 Marks


a. Using demand and supply graphs illustrate and explain the difference between
change in quantity demanded of hats and a change in demand for hats- In your answer
explain two factors that will cause a change in the demand for hats 4 Marks

b-Reflect on an occasion when you experience these differences- I Mark


b-Oeteris paribus, at the same time when the demand for yoga services has increased
the government has introduced strict regulations that has resulted in a fall in the
number of yoga service providers. Using demand and simply graphs illustrate and
explain the impact on the equilibriun price and quantity in the market for yoga
services HINT: There is more than one outcome- 4 Marks

c.Reflect on an occasion, anywhere in the world, where such a situation has occurred.
1 Mark


In Australia, governments set the fares that taxi owners/drivers can charge. At various
times, taxi owners/drivers stage protests asking to be allowed to increase their taxi
fares so that their total revenue will increase.

aWhat are taxi owners/drivers assuming about the price elasticity of demand for taxi
rides, given their confidence that an increase in price will increase their revenue? 2

b-Why do they have such an assumption? Is it a realistic assumption? 2 Marks




Sample Solution