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Explain relevant economic concepts and theories when making buying decisions.
- 1,500 words with 10% margin.
Calculate the price elasticity of demand when the price of pencils rises from $4.50 to $5.50, when income is $20,000.
What is the trade off from increasing the production of consumer goods? Answer using a diagram.
In the short run, a competitive firm has a production function,
Q = f(L) = 2.6667L0.75. The output price is $8 per unit and the wage is $5 per hour. Find the short-
run labor demand curve of the firm
Suppose a firm produces according to the production function Q = AL0.6K0.2, and faces wage rate
₵20, a rental cost of capital ₵10, and sells output at a price of ₵40.
a. Obtain and expression for the factor demand functions if A=2.
b. Compute the profit-maximizing factor demands for capital and labour if A=2.
A firm has a Cobb-Douglas production function given as
q=AX1
αX2
β
a. Solve for the factor demand functions for labour (X1) and Capital (X2)
b. If the firms’ competitive output price is p find the wage rate
c. What is the share of the firm’s revenue paid to labour and capital?
d. If α=0.6, β=0.2 and A=1 find the LR labour and capital demand curve equations
XYZ Co. operates in a competitive market. Its Total Product (Q) is given as Q=f(L)= 3L, and it
takes the wage and price as given. Derive the firm's short-run demand for labor as a function of w
and p. How much labor will the firm hire if W=₵25 and P=₵150?
Show that the quantity of labor(L) and capital(K) that a firm demand decreases with a factor’s
own factor price (w for labor and r for capital) and increases with the output price (P) when the
production function is a Cobb-Douglas of the form 𝐪 = 𝐀𝐋
𝛒𝐊
𝛗
In a two sector economy if a government imposes subsidy on labour in the manufacturing sector, what will be the effects on wage, labour and equilibrium wage
The government wants to drive the price of soybean above the equilibrium price p1 to p2. It offers growers a payment of x to reduce their output from Q1 to Q2, which is the quantity demanded by consumers at p2. Show in a figure how large x must be for growers to reduce output to this level. What are the effects of this program on consumers farmers and total welfare? Compare this approach to (a) offering a price support at p2, (b) offering a price support and a quota set at Q1, and (c) offering a price support and a quora set at Q2.
