Plot a graph of a demand curve of a normal good. Plot also a price level into your graph.
Plot a graph of a demand curve of a normal good. Plot also a price level into your graph. Define and show on your graph the consumer surplus. Now imagine, that the price of this product decreases. How will the consumer surplus change in this case? Why? (4 points)
2. In order to decrease the pollution from air travel, the government decides to tax every passenger with a 50 Euro specific tax, per passenger, and per journey. Consider the supply of air travel as elastic, and the demand as inelastic. Based on this, please, decide, if the following statements are true or false. Please, justify your answer. (Each correct answer 3 points)
a) The government should tax the suppliers of this market, because if they have to pay, they will bear the burden of the tax.
b) Because of the elasticities of demand and supply, the tax incidence falls more on the consumers.
3a. Venice is a one of the most popular tourist destination of the world. Until recently tourist could reach Venice by car, bus, airplane, ships and ferries and trains. What kind of good was the city at that time? Think about excludability and rivalry. Explain. (3 points)
3b. The city of Venice introduced an entrance fee to the city, that must be paid by each tourist while entering the city. How does this change your answer to problem 3a? Why? (3 points)
4. At Ao Nang Beach there are more than a dozen of firms offering one day speed boat excursions to Phi-Phi Islands. The firms offer approximately the same programme, and there are some small differences in their prices, they charge (1400 – 1800 baht per person). Based on this information, what do you think, what is the structure of this market (monopoly, oligopoly, monolpolistic competition, perfect competition)? Please, justify your answer. (4 points)