1. Apart from an increase in price, what other determinant would encourage Scot Rail to increase its supply of rail journeys?
There are5 non-price factors that can affect supply. They are: changes infactor prices, production, government policies, seasonal factors, changes in commodity prices and other methods.
Government policy: government grants to increase supply. In addition to the market price by the supplier of the product the customer will receive from the government to pay additional amounts. Therefore, the supply can be increased.
Seasonal factors: the company's goal is the tourism market in Scotland overthe summer operation. Therefore, the supply can be increased in summer.
2. Scot Rail faces a ‘basic economic problem’!
What is this ‘problem’ and what is the opportunity cost of the replace and repair programmed?
(A) SteamScot face \"the basic economic problems \" include: the scarcity of resources, human beings have a great desire, we must go beyond our resources. It is estimated that in the coming year there will be 2.5 million pounds to spend. On SteamScot company is considering expanding itsbusiness. However, it is also aware that in the next five years, its capital stock, as well as major maintenance overhaul will have to be. It is this humanpredicament to exceed our resources, the Board of Directors of the face.
(B) the replacement and maintenance program, the opportunity cost to open a new line between
3. How would the advertising campaign by Visit Scotland affect demand for Scot Rail journeys?
There are many factors that
determine the demand pattern, demand for commodities led to the number of changes. They are real income, population, advertising, personal taste; seasonal factors, the availability of hire purchase/ finance / other credit; other commodity prices.
In this case, the visit to Scotland will be installed in a large ad in the UK to encourage more visitors from the country, tourists from England, is expected to rise.
4. From the table in the previous passage, construct demand and supply curves on a diagram and identify the equilibrium price and quantity.
P 4 The equilibrium is determined by of demand and supply, that is at 4P=60,000. 60,000
Q
5. Using a diagram show what would happen to the equilibrium if the Scottish Executive gave Scot Rail a subsidy. Explain any changes and how the market would return to equilibrium.
Subsidies are government
policy. Scottish Executive to SteamScotsubsidies, the cost is reduced. Therefore, increased profits lead to increasedsupply. In addition to the market price paid for the product to customers, suppliers will receive additional money from the government.
S1S1 from SS to increase the supply reasons for the short term, the excesssupply of sports that will force the price of excess prices, demand will increase, and the new equilibrium price discovery in the number of P1 andP1. Therefore, the new equilibrium point, lower prices and higher in the number of E1.
6. If the Chancellor of the Exchequer was to reduce income tax, would this affect demand for Scot
Rail’s products? Explain your answer with reference to income elasticity of demand.
According to income elasticity, we know: the reduction will not affect theincome of low-quality goods and basic food and clothing needs. Increase in income will not impact the demand for durable goods and services. However, the increase in income will lead to the normal demand for commodities. In this case, if the
government cut personal income tax, the customer's real income will rise. The SteamScot product is a normal commodity. Therefore, the policy will affect the SteamScot demand.
7 (a) Calculate, using total revenue, the price elasticity of demand when:
(I) Price rises from £4 to £5 (ii) Price falls from £4 to £3
(b) If you were a member of the Scot Rail board, what would you recommend the company do in both situations? Give reasons for your advice.
Price rises from £4 to £5
Elasticity of Demand= (20,000/60,000) ÷ (1/4) =4/3＞1 elasticity Elasticity of Demand=| [(-20,000)/60,000]| ÷ (1/4) =4/3＞1 elasticity (b)
When the price of ticket rises from £4 to £5 the total revenue decreases from £240,000(60,000*£4) to £200,000(80,000*£5), that is a total fall in revenue that was lose due to the fall in price. So we don’t use way of rises price to solve question of Scot Rail.
When the price of ticket fall from £4 to £3 the total revenue still are £240,000(60,000*£4). Although £3 and £4 when the total revenue are same, we should be choose £3 to increase to improve other sales. Because the quantity demand of£4 is lower than£3. And more customers will be bringing other revenue in order to obtain greater benefits.
