ECS2601 Assignment 01 - Semester 1 2026
Name: [Your Name]
Student Number: [Your Student Number]
Module Code: ECS2601
Assignment: 01
Due Date: [Insert Due Date]
, Question 1
1.1 The Market Mechanism (2 marks)
The market mechanism is just a fancy way of saying how prices go up and down based on
what people want to buy and what businesses want to sell. Think of it like this: if everyone
suddenly wants to buy avocados, the price goes up because there aren't enough. Then
farmers see the high price and think "hey, I can make money growing more avocados," so
they plant more. Eventually there are lots of avocados and the price comes back down.
Nobody is in charge of telling them what to do - it just happens naturally. That's basically
how markets work.
1.2 Di erence between Inferior Product and Gi en Good (2 marks)
I'll explain inferior products and Gi en goods.
An inferior product is something you buy less of when you have more money. For example,
when I was broke I used to buy those cheap 2-minute noodles all the time. Now that I have
a job and more cash, I don't buy them anymore - I buy real food instead. So noodles are an
inferior good for me.
A Gi en good is weird and super rare. It's when the price of something goes up, but people
actually buy MORE of it. This only happens with really basic foods that poor people rely on,
like bread or rice. If the price goes up, they can't a ord to buy meat or vegetables anymore,
so they have to buy even more bread just to fill their stomachs. The main di erence is that
while all Gi en goods are inferior, most inferior goods are NOT Gi en goods.
1.3 Shape of Indi erence Curves (4 marks)
(a) A household buying any two things each week
When someone buys normal stu like food and clothes, the indi erence curves curve
inward (we call this convex). This means that if you have lots of food and not much clothes,
you're willing to give up a lot of food to get more clothes. But once you have enough
clothes, you won't give up as much food to get even more clothes.
Name: [Your Name]
Student Number: [Your Student Number]
Module Code: ECS2601
Assignment: 01
Due Date: [Insert Due Date]
, Question 1
1.1 The Market Mechanism (2 marks)
The market mechanism is just a fancy way of saying how prices go up and down based on
what people want to buy and what businesses want to sell. Think of it like this: if everyone
suddenly wants to buy avocados, the price goes up because there aren't enough. Then
farmers see the high price and think "hey, I can make money growing more avocados," so
they plant more. Eventually there are lots of avocados and the price comes back down.
Nobody is in charge of telling them what to do - it just happens naturally. That's basically
how markets work.
1.2 Di erence between Inferior Product and Gi en Good (2 marks)
I'll explain inferior products and Gi en goods.
An inferior product is something you buy less of when you have more money. For example,
when I was broke I used to buy those cheap 2-minute noodles all the time. Now that I have
a job and more cash, I don't buy them anymore - I buy real food instead. So noodles are an
inferior good for me.
A Gi en good is weird and super rare. It's when the price of something goes up, but people
actually buy MORE of it. This only happens with really basic foods that poor people rely on,
like bread or rice. If the price goes up, they can't a ord to buy meat or vegetables anymore,
so they have to buy even more bread just to fill their stomachs. The main di erence is that
while all Gi en goods are inferior, most inferior goods are NOT Gi en goods.
1.3 Shape of Indi erence Curves (4 marks)
(a) A household buying any two things each week
When someone buys normal stu like food and clothes, the indi erence curves curve
inward (we call this convex). This means that if you have lots of food and not much clothes,
you're willing to give up a lot of food to get more clothes. But once you have enough
clothes, you won't give up as much food to get even more clothes.
