INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
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MID-TERM EXAMINATION
Date: 9th November 2021
Duration: 1 week
Student ID: .....BAACIU20075...Name: TRẦN THỊ KIỀU OANH.
SUBJECT: INTRODUCTION TO MICRO ECONOMICS (BA117IU)
Dean of School of Business
Lecturers
Assoc. Prof. Nguyen Van Phuong
Dr. Cao Minh Man
Dr. Huynh Thi Ngoc Hien
GENERAL INSTRUCTION(S)
1. This is an open-book examination;
2. Plagiarism is strictly prohibited;
3. File type: word .doc or .docx. Please name the file as follows: Fullname_ID_Class_MidMicro
4. Deadline: 6pm 13rd Nov 2021. Late submission will NOT be accepted for any reason.
5. This exam paper consists of 04 sheets in total.
6. The exam has a total of 100 points.
GOOD LUCK!
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INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
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QUESTION 1:
(35 points)
Consider the market for minivans. For each of the events listed here, identify which of the
determinants of demand or supply are affected. Also indicate whether demand or supply increases
or decreases. Then draw a diagram to show the effect on the price and quantity of minivans.
a. People decide to have more children.
If people decide to have more children, they are more likely to need
higher capacity vehicles, so increases the demand of minivans, supply is unaffected.
The supply curve does not shift, the demand curve would shift out, shift to the right,
increasing both the price and the quantity sold.
P
S
P2
E2
E1
P1
D2
D1
Q
Q1
b.
Q2
A strike by steelworkers raises steel prices.
A strike by steelworkers raises prices of the steel means increase of input cost
to produce a minivan. Therefore, the supply of minivans is decreasing, demand is not
affected.
Demand curve does not move, and supply curve shifts in or shifts to the left. The
shift causes equilibrium price to rise and quantity of the minivans to fall.
P
P2
S2
E2
S1
E1
P1
D1
Q
Q2
Q1
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INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
-----0-----
c. Engineers develop new automated machinery for the production of minivans.
Engineers develop new automated machinery typically cuts the requirement for human
labor such as from those striking steelworkers and reduce the production cost or time, so
that increases supply, and the demand is unaffected.
The demand curve does not shift, the supply curve shifts to the right. The shift
causes a decrease in price and an increased quantity of minivans.
P
S1
E1
S2
P1
P2
E2
D1
Q1
Q2
d. The price of sports utility vehicles rises.
Sports utility vehicles are substitutes for minivans, so if the price of them increases,
it leads to the demand of them decreasing, then increasing in demand of
minivans. Supply is unaffected by this event.
The supply curve does not change, and the demand curve shifts out, shifting to the
right. The shift causes both the price and the quantity of minivans to increase.
S
E2
P2
P1
E1
D2
D1
Q
Q1
Q2
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INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
-----0-----
e. A stock-market crash lowers people’s wealth.
A stock-market cash lowers people’s wealth leads to their income is reduced. Because
minivans are from middle to high valuable level goods, hence the demand for minivans
would decline, supply is not affected.
The supply curve has not changed, and the demand curve shifts to the left. It leads to a
reduction in both the price and the quantity sold of minivans.
P
S
E1
P1
E2
P2
D1
D2
Q2 Q1
QUESTION 2: (Word limit: 450 – 800 words)
(35 points)
a. Using the concepts of trade, demand, supply, and market explains why the price of
food has increased so much in Ho Chi Minh City during the social distancing
lockdown.
(20 points)
limited trade -> supply decrease; demand increases
 Price increase
b. What did you learn from the lockdown time?
(15 points)
QUESTION 3: (Word limit: maximum 300 words)
(30 points)
Read the following passage and answer two given questions.
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INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
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Face masks market during Covid-19 Pandemic
In two first quarters of 2020, the COVID-19 has inflated the price of medical face masks in
Vietnam 5-7 times its original price, according to Tuoitrenews. The average price level
before the virus was about VND40,000 per box, but during that period it is VND200,000300,000, with some even at VND350,000. These face masks often have little proof of origin
and have no listed price on the shelves. Some local medical stores are suspected to have
taken advantage of the current situation to make profit, and some have even withheld their
supply of face masks to wait for prices to increase. Despite the absurd price of this common
good, customers (especially in Hanoi and Ho Chi Minh City) are still lining up, allowing
stores to raise the prices even higher.
Given frequently changing business practices and local COVID-19 transmission and
vaccination rates, masks will likely remain useful right now. Fortunately, in contrast with
early on in the pandemic, these days you have many high-quality options to choose from.
Between disposable respirators and comfortable, reusable cloth masks that filter nearly as
well as medical-grade masks (and can be adjusted for a more-secure fit), just about everyone
can find something they feel good wearing. This help release the heat of the face mask
market.
a.
How can you describe the price elasticity of demand of medical face masks in the
two first quarters of 2020 and right now? What factor(s) would likely explain this?
(15 points)
b.
If the government imposes a binding price ceiling on the price at which a medical
face mask box can be sold. Explain how does this decision affect the face mask
market efficiency?
(15 points)
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INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
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QUESTION 3:
a) The price elasticity of demand of medical face masks in the two first quarters of 2020 is
inelastic because changes in price have a relatively small effect on the quantity demanded.
The quantity of demand changed very small, even still increased, while the price rose 500700%, but percentage change in Q was still less than percentage change in P. Hence, Price
elasticity of demand was less than 1.
In contrast, right now, because of many options, if the price increase, customers will choose
the others alternative products like cloth masks. This means the percentage change in Q is
greater than percentage change in P. Therefor, the price of demand of masks, now, is
greater than 1.
The first factors led to this difference is necessity: The more necessary a good is, the lower
the elasticity, since people are willing to buy it no matter the price. Because early on in the
pandemic and people hadn’t got covid-19 vaccinations, medical masks were extremely
necessary. But now, there are many alternative products or protection.
The second is Availability of substitute goods: The more alternatives available, the higher
the elasticity, because people can easily switch from one good to another if there is an even
small price change.
b) In economics, when the goverment does not allow price increases or ceiling prices means
that increasing production, or rushing orders are not as profitable. This means mask
production is less likely to increase to fulfill demand, a lack of supply or oversup demand.
At covid 19 pandemic, more people will want to buy the product than companies are willing
to sell at that price, that more masks are demanded than are supplied (a shortage). Any time
you get the government involved in the marketplace, only inefficiency results. An
ineffective market cannot be an efficient market.
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INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
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INTERNATIONAL UNIVERSITY (IU)
(BA117IU)
School of Business
Course: Introduction to Micro Economics
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