Academic Year:     2022/23

Module Code:         BS1197

Module Name:        Principles of Microeconomics

ANSWER ANY TWO (2) OUT OF THE SIX (6) QUESTIONS.

WRITE YOUR ANSWERS ON A WORD DOCUMENT.

ALL MARKS CARRY THE SAME WEIGHT.

Please use the following criteria:

.    Font: Arial

.    Font Size: 12

.    Spacing: 1.5

QUESTION 1: WORD LIMIT – DO NOT EXCEED 1,200 WORDS

Standard tickets for Beyonce’s Renaissance tour went on sale in the UK for a price of £56 in February 2023. Many fans complained about receiving constant error messages and being stuck in long on-line queues of more than 500,000 people. In response to these negative comments a spokesperson for Ticketmaster, the company in charge of selling the tickets, stated that:

‘ There was never going to be enough tickets to meet demand’

Using demand and supply analysis, discuss this comment paying particular attention to the potential implications for (a) the existence of a secondary ticketing market and (b) allocative efficiency. Explain the impact of different assumptions about sorting in your answer.

QUESTION 2: WORD LIMIT – DO NOT EXCEED 1,200 WORDS

Assume that tighter immigration laws cause a reduction in the supply of agricultural workers and this leads to higher wages in the sector. Dean’s Fruity Produce Ltd, a farm in Leicestershire, uses two inputs to harvest its output – machines (capital) and agricultural workers.  Dean,  the  managing  director  of  the  company,  has  employed Karishma (a brilliant statistician) and she has estimated that the business’s long-run wage elasticity of labour demand is -1.7.

Using isoquant/isocost analysis, explain the possible impact of the higher wages on the output level, total cost of production and input-factor mix of this business in both the short and long-run.

How would your answer change if Karishma had estimated that the long-run wage elasticity of labour demand was -0.4?

QUESTION 3: WORD LIMIT – DO NOT EXCEED 1,200 WORDS

Jensen and Miller (2008) studied the consumption of rice amongst low-income

families in a district of China. They estimated the price elasticity of demand and

found that it varied widely between different categories of low-income families. Some of their results are illustrated in the table 1 below.

Table 1

Using indifference curve/budget constraint diagrams and appropriate microeconomic theory, provide an explanation for these estimated figures. You must discuss and illustrate relevant income and substitution effects in your answer.

QUESTION 4: WORD LIMIT – DO NOT EXCEED 1,200 WORDS

“Product differentiation can never act as a barrier to entry so studying monopolistic competition is a useful model of market structure” Critically discuss this assertion    paying particular attention to the implications for the economic profitability of firms.