Full-Time End-of-Module A 2019/20 Semester) Med Code/ TBUS E es Care Cadea u RUN BU BA B BA B BU BA

Full-Time End-of-Module A 2019/20 Semester) Med Code/ TBUS E es Care Cadea u RUN BU BA B BA B BU BA R RUBU BA B342222 222 RUL RUBU Long Questions Total 100 marks) Answer Any Five out of six questions. Each question carries 20 marks Question 1 The market demand and supply schedules for a premium Belgian chocolate in Hong Kong are shown as follows: Price per box Quantity Supplied (No. of boxes) 8.000 7.000 5.000 4.500 4.000 3.500 3,000 2.500 2,000 Quantity Demanded (No. of boxes) 3.000 3.500 4.000 5.000 5.300 5,500 9,800 6,000 5,000 4,000 3,000 2,000 a) Identify the equilibrium price and quantity of the Belgian chocolate. (1 mark) b) ( Using the average method, calculate the price elasticity of demand of the following price ranges of the premium Belgian chocolate: • • between $3,500 and $4,500, between $2,500 and $3,500 (1.5 marks) (1.5 marks) (ii) Base (2 marks) Based on your answers in part b) () above, what pricing strategy should the chocolate supplier adopt in order to increase its revenue. Give TWO reasons to explain why the price elasticity of (2 marks) demand for the premium Belgian chocolate may become inclastic Page 2 of 10 Full-Time End-of-Module Asse t 2019/20 (Semester 1) Moduk Code/Title: BUS 3003 Economics Course Code/Level/Year: R O4/ BAT014, BAI , BAIN4002 BAT004 B41400/T, BAINOS BAS. BAI20/01, BAIN/02 8412402. BAINO. BAM BAMS2 B22. BAINO 24024124005424002012072200224200 RUMOR 2002 2412001 RAM RAM 42019 c) Specify the relationship between the following goods and the premium Belgian chocolate. State the possible values of their cross elasticities of demand. (i) Handcrafted Swiss candies (ii) Luxury wine (2 marks) (2 marks) d) With the aid of diagram, explain the following situations: (i) (3 marks) How the demand and supply will be affected if the expected future price of the premium Belgian chocolate increases. (3 marks) (ii) If only 5,000 boxes of the Belgian chocolate were imported into Hong Kong at all price levels, what would be the shape of the supply curve? What are the type and the value of price elasticity of supply? (Ignore the equilibrium price and quantity in part a) above.) e) Evaluate the change in quantity demanded and the possible value of (2 marks) income clasticity of demand for Belgian chocolate if the expected future income of the chocolate lovers decreases. (Assume that chocolate is a normal good.) (Total: 20 marks) Page 3 of 10


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