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The following graph shows the equilibrium price and quantity in the market for chewing
gum. Suppose the government passes a bill to impose a tax of 2 dollars on the production
of chewing gum.
a) What is the new equilibrium price and quantity?
b) What is the amount of tax revenue earned by the government?
c) What is the deadweight loss of this tax?
d) Which is greater: the loss in consumer surplus or the loss in producer surplus?
Use demand and supply curves to illustrate and explain why rare items such as the Mona Lisa painting by Leonardo da Vinci are sold at such high prices
Suppose you are given RM500 each month to spend on meals and sports. Each meal will cost you RM5 and each sport will cost you RM2 per time you spend. Explain with a diagram to show that you have achieve an optimum consumption. Carefully derive the bundle of meals and sports at the optimum consumption point and the intercept points in your diagram. Could you able to obtain a higher optimum consumption point if your budget remains at RM500? Explain
Suppose in winters demand of dry fruits increases. Further supply of dry fruit increases due to favorable environmental condition. Explain with the help of demand and supply curve, how price and quantity will respond
Herald, a barista, earned 260,000 in 2019. But in 2021, he was retrenched and decided to open his own coffee shop. After a year, he submitted the following data :
- He spent 45,000 on equipment.
- He leased a small space for P70,000 a year.
- He paid P 100,000 in wages.
- He sold worth P950,000 of coffee a year.
- He used P150,000 from his saving account, which pays 3% interest a year.
- He borrowed P250,000 at 10% a year from the bank.
- Normal profit is P350,000 a year.
Compute for the following :
- Herald's explicit costs (10 points)
- Herald's implicit cost (10 points)
- Herald's economic profit ( 10 points)
Explain the effects of rent control in the short and the long run. Why and
how do the effects vary over the period of time?
CASE STUDY: “Industry-level Dynamics of COVID-19 Economic Crisis
and its Implications”
In the current pandemic-related GDP growth slowdown across the world,
which industries or sectors in the Indian economy do you consider to have
most benefited from the Covid-19 crisis and why? Explain and highlight in
detail using the Demand-Supply analysis to substantiate your argument.
Justify your analysis by supporting it with facts-cum-online data and
substantiate your argument by extensively using graphs to highlight your
answer.
[The objective of this case study is to enable you to apply microeconomic
skills to real world economic scenarios. Accordingly, you are required to be
careful while writing your argument. You are required to refer to both the
Mankiw textbook and the online/offline material to substantiate your answer.]
(5 Marks)
Explain in detail the process by which the consumer arrives at an equilibrium
point. Illustrate this process through the concepts of budget line and
indifference curves. Using this framework, explain the income and
substitution effects for an inferior good when its price rises.
Given the following utility function for two goods X and Y
U(X, Y) =
Where 0<α<1
i) Establish the Mashallian demand functions for X and Y [8 Marks]
ii) From (i) above, derive the indirect utility function [3 Marks]
iii) Using the indirect utility function, derive the expenditure function [4 Marks]
iv) Estimate the Hicksian demand function for X and Y by Shephard’s lemma [ 5 Marks]
Using (i) and (iv) above for X, establish the Slutsky equation for good X. [8 Marks
Graph the following budget lines:
a) 10 F + 20 C = 400
b) 5 F + 10 C = 400
c) 10 F + 10 C = 400
d) 20 F + 20 C = 400
Compare a) to b), a) to c), and a) to d). Which comparisons represent income changes and which represent price changes
#339914 on Dec 2023