ECON 103 Principles of Microeconomics- Oral Double Auction Markets

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Firstly, explain how the price system in competitive markets eliminates a short-age and a surplus.

Secondly, explain how markets at equilibrium maximize total surplus. What are possible sources of inefficiency in oral Double Auction Markets?

Thirdly, from the following table of Willingness to Pay derive the demand schedule(in whole dollars) and check for the validity of the law of demand. Simi-larly, for the table of Willingness to Accept derive the supply schedule (inwhole dollars) and check for the validity of the law of supply. Find the equilibrium quantity.

ECON 103 Principles of Microeconomics- Oral Double Auction Markets

NameWTPPhil$200Derek$150Ray$250Gary$50Kerry$100NameWTAAlma$201Bettina$270Christine$101Dorothy$176Erica$51

Fourthly, what does it mean for the consumer to have a highly inelastic demand for a certain life saving medicine? What will happen if cheaper generic drugs become unavailable in a country?

iscuss the welfare effects of (i) a price ceiling and (ii) the introduction of an import tariff.

Microeconomics consists of theories of the decision making of economic agents (consumers and producers) and their interaction through markets. The objectives and constraints that direct the decision making of economic agents will be examined in some detail. In addition the outcome of their interaction will depend on the nature of the market. Markets may be competitive or characterized by some form of imperfect competition or monopoly. Markets may also be subject to various types of market failure, and are affected by government interventions and regulations. The concept of economic efficiency provides a basis for the appraisal of market performance and of government intervention.