Answer to Question #132054 in Microeconomics for Ashmita Shrestha

Question

Question 3
Compare the impact of a recession that reduces consumer income by 5 percent on the
consumption of durable goods and house rentals. Suppose that the income elasticity of
demand for durable goods is 1.5 and the income elasticity of demand for house rentals is 0.3.
Based on your response, make a policy argument to support through government funding
either businesses or house rentals.
Question 4
Using a supply and demand analysis show first the labour market in equilibrium, and then
show
a) the effect of a reduction in the demand for labour as a consequence of a pandemic.
b) The effect of a government subsidy to producers to restore the employment of labour.
Provide a diagram with clear axis details. Make sure to explain what sort of assumptions you
are making on the elasticities of demand and supply.

Answer 1

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