UNIVERSITI KUALA LUMPUR
BUSINESS SCHOOL
GROUP TUTORIAL : 2
OCTOBER 2025 SEMESTER
COURSE CODE : EIB10203
COURSE NAME : PRINCIPAL OF ECONOMICS
LECTURER NAME : DR. YUSRI BIN YAHYA
DATE : 27 OCTOBER 2025
Prepared by:
Name Student ID Questions
NUR AINA BT MOHAMAD 62216324194 Question 2
IHSAN
KU NUR BATRIYIA BT 62216324091 Question 1
KU AZHAR
NUR SYAFINATUL 62212323142 Question
NAJJAH BT MOHD YASIN
NUR AIN SYAFIQAH BT 62216324040 Question
MOHD SULAIMAN
AKTHER HOSSEN 62212224589 Question
SECTION B: STRUCTURED QUESTIONS
QUESTION 1
1. State the Law of Demand.
2. Explain why the demand curve slopes downward (use substitution effect and income
effect).
3. Give one real-life example of a movement along the demand curve and one example of
a shift of the demand curve.
Answer :
A movement along the demand curve happens when a change in the price of a
good leads to a change in the quantity demanded; for example, a Black Friday
sale dropping TV prices from £800 to £500 causes more consumers to buy
TVs, moving downward along the curve. Conversely, a shift in the demand
curve occurs when non-price factors like income change, increasing demand
for smartphones even if prices remain constant, shifting the curve to the right.
The demand curve diagram typically shows quantity demanded on the
horizontal axis and price on the vertical axis, where a movement along the
curve reflects price changes, and a shift represents changes in factors such as
income, tastes, or prices of related goods. Evaluating these concepts, a
movement along the curve is simpler to predict as it depends only on price, but
a shift can have a greater market impact, altering demand at every price point.
However, shifts in demand are often more complex to analyze due to multiple
influencing factors, making it harder for firms to anticipate changes in
consumer behavior and requiring them to stay adaptive. Understanding both
effects is crucial for businesses to set prices and forecast sales effectively.
QUESTION 2
1. State the Law of Supply.
Answer:
The Law of Supply states that, other things being equal, when the price of a good rises, the
quantity supplied of the good also rises, and when the price falls, the quantity supplied
falls as [Link] occurs because sellers benefit more from production when prices are
higher, which motivates them to produce and sell more.
2. Explain why the supply curve slopes upward.
Answer:
The supply curve goes up because higher prices make producers want to supply more. When
prices rise, they can cover costs and earn more profit, so they produce more. But when
prices drop, profits shrink, and producers supply less or leave the market.
3. Identify and explain two determinants of supply from the slides.
Answer :
Two key determinants of supply are production costs and technology. Production
costs refer to the expenses required to produce a good or service, including
input prices like raw materials and wages; when these costs rise, supply
decreases because producing becomes less profitable, leading firms to supply
less at each price level. Conversely, if production costs fall, supply increases.
Technology is another determinant, where improvements can make production
more efficient, reducing costs and allowing suppliers to increase output. Better
technology thus shifts the supply curve to the right, indicating increased
supply. Both factors influence supply independently of the good's price and
cause shifts in the supply curve rather than movements along it.
SECTION 3: APPLICATION QUESTIONS
QUESTION 2
The demand and supply for potato chips are;
Price (cents per bag) Quantity Demanded Quantity Supplied (millions
(millions bag/week) bag/week)
50 160 130
60 150 140
70 140 150
80 130 160
90 120 170
100 110 180
1. Draw a graph of the potato chip market and mark in the equilibrium price and
quantity
2. If the price is 60cents per bag, is there a shortage or a surplus, and how does the price
adjust?
1. Draw a graph of the potato chip market and mark in the equilibrium price and
quantity
Answer :
The market data provided for the potato chips is:
Price (cents per bag) Quantity Demanded Quantity Supplied
(millions bag/week) (millions bag/week)
50 160 130
60 150 140
70 140 150
80 130 160
90 120 170
100 110 180
Determining Equilibrium:
Equilibrium occurs where the Quantity Demanded (QD) equals the Quantity Supplied (QS).
Based on the data, this exact point is not explicitly listed, but we can see the market is perfectly
balanced between 60 cents and 70 cents.
● At 60 cents, there is a shortage of 10 million bags (150 QD - 140 QS).
● At 70 cents, there is a surplus of 10 million bags (140 QD - 150 QS).
Assuming a linear relationship between the data points, the market equilibrium is exactly at the
midpoint:
● Equilibrium Price ($P_e$): 65 cents per bag
● Equilibrium Quantity ($Q_e$): 145 million bags per week
The graph below visually represents the demand (blue line) and supply (red line) curves, with the
equilibrium point marked as 'E'.
2. If the price is 60cents per bag, is there a shortage or a surplus, and how does the price
adjust?
Answer :
At a price of 60 cents per bag, the market experiences a shortage.
The Humanized Explanation:
Imagine you are a potato chip lover walking into a store, and the price is a very attractive 60
cents per bag.
1. The Demand Side (The Buyers): At this low price, a huge number of people (150
million, to be exact) want to grab a bag. The demand is high because it feels like a great
deal!
2. The Supply Side (The Sellers): However, for the chip manufacturers, 60 cents isn't a
very profitable price. They are only motivated to produce and supply 140 million bags.
This results in a deficiency of 10 million bags (150 million wanted, while 140 million are
provided). Put differently, there are 10 million disgruntled customers who are seeking a bag
when that bag is not to be found on the shelf. The shelves never restock.
How the Price Adjusts:
This deficiency places competitive pressure on buyers. With limited chips to go around, buyers
may be willing to pay slightly more money to ensure they get a bag. Chip store owners and
manufacturers are aware of this tremendous demand and believe they can raise the price without
losing all their customers.
Consequently, the price will be pushed up from 60 cents. This upward pressure will continue
until the price reaches its equilibrium price of 65 cents, where the number of bags that people
want to purchase is equal to the number of bags the suppliers want to produce. At that time, the
market "clears," and the shortage is gone.