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Question:
(a) With the help of diagrams, explain how the price and quantity demanded or supplied of fuel will change under the different scenarios:
(i) Consumers expect a future rise in prices of fuel;
(ii) Social and Political instability in an oil producing country; and
(iii) A new substitute to fuel - i.e. liquefied petroleum gas is introduced in the market.
(b) Using the concept of elasticity, distinguish between inferior, normal and luxury goods.
(c) Describe what is meant by cross elasticity of demand and price elasticity of demand.
Analyse the possible effects of speculation on exchange rates. Definition of speculation in currencies as betting on the appreciation/depreciation of a given currency. E
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A consumer purchases food (X) and clothing (Y). Her utility function is given by: , income is $100 and the price of food is $1 and the price of clothing is Py. a. Derive the equ
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