Macroeconomics Answers

1.   Suppose Alphonso’s town raises the price of bus tickets from $0.50 to $1 and the price of burgers rises from $2 to $4. Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso’s weekly spending money increases from $10 to $20. How is his budget constraint affected from all three changes? Explain.

Using cardinalists approach of consumer behavior distinguish between income and and substitution effect of a price rise for a normal good?

10. A firm supplies 200 units of a good at a price of Rs 5 per unit. When

price changes it supplies 100 units less. Price Elasticity of Supply is 2.5.

Calculate price after change in quantity.

9. A fall in the price of X from Rs. 12 to Rs. 8 causes an increase in the

quantity of Y demanded from 900 to 1,100 units. X and Y are which type of

goods in the question.

A 10 percent decrease in income decreases the quantity demanded of

compact discs by 3 percent. Find the income elasticity of demand for

compact discs.

7. A 10 percent decrease in the price of a Pepsi decreases the demand for a

Coca-Cola by 50 percent. Find out the cross elasticity of demand between

Pepsi and Coca-Cola.

When the price of Apricot was Rs. 100 per kg, 200kgs of Apricot were

demanded in Delhi market per day. Now the Apricot price has increased to

Rs. 110 per kg as a result of which the quantity demanded reduced to 160

kg per day. Calculate the price elasticity of demand by using the mid - point

method.

5. Assume that product A is a normal good and product B is an inferior

good. If the income of the consumer increases, graphically analyse its effect

on demand for good A and B.

3. Suppose fidget spinner market is in equilibrium. If the price of ball

bearing falls and all other variables are held constant, what would you

expect for the new price and quantity of fidget spinner?

Given two commodities A and B, where price of A is ₦50 and the price of B is ₦60. If the consumer’s income is ₦1200 and the utility function U = AB, Find: i. the equilibrium values of the two commodities. ii. Mention four properties of the demand function derived in (i) above