BBM105/03 Economics for Business Assignment 1, 2026 | WOU

BBM105/03 Assignment 1

Instructions

1. Assignment 1 contains FOUR (4) questions and you are required to answer ALL
2. Assignment 1 carries 50% of your final total marks.
3. The assignment should be typed using Arial, font size 12 and 1.5 spacing, approximately 1500-2000 words and in essay format.
4. The deadline for the submission of Assignment 1 is 25 October 2026, 11:59pm. A softcopy must be submitted via University Management System (UMS).] There are no extensions on the deadline for this assignment.
5. Please note that all offline submissions (e.g. email, WhatsApp, etc.) will not be accepted.

Answer ALL questions

Question 1

Grab operates a ride-sharing service in a city. To boost driver earnings and cover rising fuel costs, Grab increased the average fare per trip from P₁ = RM10 to P₂ = RM12. Following the price change, daily ride requests dropped from Q₁ = 5,000 rides to Q₂ = 4,000 rides.

(a) Calculate the Price Elasticity of Demand (PED) for Grab trips using the midpoint method. Is the demand elastic, inelastic, or unit elastic?

[10 marks]

(b) Calculate total daily revenue before and after the price adjustment. Based on your PED result in part (a), explain why total revenue moved in the direction it did.

[8 marks]

(c) Suppose the government steps in and sets a price ceiling of RM8 per ride to make urban transportation affordable. Explain the market outcome this creates and describe two real-world non-price impacts riders might experience.

[7 marks]

Question 2

In Malaysia, Tenaga Nasional Berhad (TNB) operates as the sole owner and operator of the national electricity transmission grid (Grid Nasional) and primary power distributor across Peninsular Malaysia. Building duplicate transmission grids, sub-stations, and distribution cables requires massive upfront capital investments, making market entry by rival firms economically non-viable. To protect consumers from potential price exploitation while maintaining grid stability, the Malaysian government regulates electricity tariffs through the Energy Commission using an Incentive-Based Regulation (IBR) framework.

(a) Identify the specific type of monopoly market structure illustrated by TNB. Explain three key barriers to entry that protect TNB’s market position, clearly emphasizing the concept of economies of scale and high fixed infrastructure costs.

[8 marks]

(b) Contrast the economic outcomes of an unregulated single-price monopoly with those of a perfectly competitive market. Explain why an unregulated monopoly is considered both allocatively and productively inefficient, detailing differences in price, output, consumer surplus, and deadweight loss.

[9 Marks]

(c) Evaluate two regulatory pricing strategies government regulators could impose on a natural utility provider: Marginal Cost Pricing (P = MC) and Average Cost Pricing (P = ATC). Discuss one major practical challenge regulators face when attempting to enforce these rules on a national utility provider.

[8 marks]

Question 3

The island nation of Kunta produces only two consumer goods: Solar Panels and Fresh Mangos. The table below details production and price data for two consecutive years, with Year 1 selected as the base year:

(a) Calculate Nominal GDP for Year 1 and Nominal GDP for Year 2.

Answer

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