Macroeconomics Answers

Suppose that the world price of lithium-ion batteries is $150. If the US were to move from autarky to free trade, what would be the gains from trade?

Five objectives of macro economics

Fast-food restaurants like McDonald’s are replacing cashiers with touch-screen ordering kiosks. Currently, the marginal product of another cashier is 48 customers served per hour; the marginal product of another kiosk is 32 customers served per hour. A cashier can be hired for a wage of $10; a kiosk rents for $12.
a. Is McDonald’s currently minimizing the cost of serving its customers?
b. Show how McDonald’s can improve its profits by changing its input mix.

Suppose, there is a consumer who derives utility from the consumption of two goods, X & Y, her utility function is U (X,Y) = X0.75 Y0.25. Initially, the price of X & Y are given byP_x&P_y. Her total income is given by m.

a) Form the Lagrangian Function for the the expenditure minimization problem.
b) Derive the Hicksian demand functions for X & Y.
c) If U=20, P_x=6 &P_y=2, find the values of X & Y.
d) Based on your answers in part (c) what can you conclude about the relation between the two goods?

There are two goods A and B, with prices PA and PB respectively. Carry out a graphical Slutsky decomposition when the price of A falls from PA to PA1. Graphically derive the compensated and uncompensated demand curves

A consumer has a utility function u(X1, X2) =1/((1/X1) + (4/X2)), with prices of the two goods Px1 and Px2 respectively. If his total income is given by m: (10 marks)

a) Find this consumer’s Marshallian demand function for each good.
b) Find this consumer’s indirect utility function.
c) Find this consumer’s expenditure function.

What does transfer payment mean?
What does proportional taxes and Lump sum taxes mean ??
How to Solve the equation of proportional taxes ?

If the price of a commodity increases from $.40 and $. 60 and its supply increases from 6 kg and 9 kg . Calculate its elasticity of supply.

Why does the law of increasing returns apply.

Calculate percentage change in quantity demanded of a commodity as a result of 20% fall in its price. Assume that the commodity has a price elasticity of (–)3.