ECO 1003 – Microeconomics

Dubai Men’s College

Course ECO 1003 – Microeconomics

Assessment 3 – UAE market Case study analysis – 20 % (Group project)

Date: Week 12    Assessment date: Week 14

Time allowed 120 minutes Weighting 20% Group
Instructions to Candidates


·  This is an OPEN BOOK examination- project case study.

·  The group must attempt ALL questions.


Case study Tested Learning Outcomes 1,2,3,4,5

CLO 1 – Explain fundamental microeconomic concepts including scarcity, opportunity costs and production possibility curves.

CLO 2 – Use supply and demand model to identify market equilibrium and analyze the impact of overall changes in supply and demand.

CLO 3 – Compute price elasticity and discuss the relationship between revenues and price elasticity of demand.

CLO 4 – Determine a firm’s profit-maximizing decision in the short run.

CLO 5 – Analyze behavior of firms in a perfectly competitive market and monopoly both in the short-run and long run.


Academic Honesty Statement – In accordance with HCT policy LP201- Academic Honesty


• Students are required to refrain from all forms of academic dishonesty as defined and explained in HCT procedures and directions from HCT personnel.

• A student found guilty of having committed acts of academic dishonesty may be subject to one or more of the disciplinary measures as outlined in Article 33 of the Student and Academic Regulations.


Group members

Name _____________________________ ID ______________________ Signature______________

Name _____________________________ ID ______________________ Signature______________

Name _____________________________ ID ______________________ Signature______________

Name _____________________________ ID ______________________ Signature______________

Name _____________________________ ID ______________________ Signature______________

Name _____________________________ ID ______________________ Signature______________


Q No. 1 2 3 4 5 6 7 8 9 10 11 Total
Marks 6 4 2 2 2 2 2 4 8 2 16 50






  1. Identify the determinants of demand on cars in this case study and state whether they are shifting demand left or right. (3 determinants). Show the effect on the car market using a labelled graph.

(6 marks for correct shifts 3x 2)


  1. The Motor Transport Authority (MTA) expects that new car sales will decrease from 48,500 cars in December to 46,950 cars in January due to 5% Value Added Tax (VAT) in 2018, which will be completely passed on to consumers. Calculate PED, state whether it is elastic or inelastic, and, state what manufacturers and dealers should do to maximize revenue.                                     (4 marks total – 2 x 2 marks)




  1. If household income in the GCC has decreased 18% over the past year, and new car sales in the region have decreased from 1.1 million to 875,000. Does this indicate that cars are normal or inferior goods? Show your calculations.               (2 marks)



  1. Given the information in the case study, calculate the cross price elasticity of demand between personal cars and ride sharing services in the UAE.                                                                                                                                        (2 marks)






  1. Explain what Uber and Careem would like to happen to oil prices in the future and why.                                                                                                             (2 marks)


  1. Explain the reasons why price elasticity of demand for cars in the GCC is inelastic.                                                                                                (2 marks, 2×1)


  1. Technological progress has most recently allowed Tesla company to provide its electric cars at a lower price to end consumers. How does this affect car sales in GCC and MENA region? Explain your answer.                                                                     (2 marks)


  1. Using a diagram (and your knowledge of supply and demand), show how the information about the Asian new car sales in the case study will affect price and quantity.               (4 marks total – 2 for shift + 2 for new P & Q)




  1. Using the information in the case study and any of the information given to you in the previous questions, what do you expect to happen to price and quantity of new car sales in the region in 2017 – 2018?

(8 marks total – 3 x 2 for each factor discussed / drawn + 2 for a reasonable conclusion)




  1. If the public transportation ( metro and buses ) services in Dubai improve , explain the effect on the sales of the following products;
    1. Car garage services.
    2. Taxi Services.                                                                     (2 marks)









  1. The following information is available for USA car manufacturers. Costs are all in $.


Quantity Variable Costs Total Costs
0   14,500,000
10,000 18,000,000  
20,000   65,500,000
30,000   115,950,000


  1. What is the fixed cost for USA car manufacturers?                     (1 mark)
  2. What is the difference between fixed costs and variable costs? Give examples of each in the case of car manufacturers?        (3 marks)
  3. What is the average total cost when quantity is 20,000? (2 mark)
  4. What is total cost when quantity is 10,000?                                   (1 mark)
  5. What is average variable cost when quantity is 30,000                     (1 mark)
  6. What is average fixed cost when quantity is 10,000? (1 mark)
  7. What is average fixed cost when quantity is 75,000? (1 mark)
  8. Explain the relationship between quantity and average fixed cost. (1 mark)
  9. What is the marginal cost of changing production from 10,000 to 20,000 units?

(1 mark)

  1. If the US manufacturer sells cars to UAE dealers for 4000 $, what is total profit when quantity is 30,000 units?                                                       (4 marks)