Microeconomics Answers

Suppose the price ratio of two goods is 3/4 and Shubman, another student in college has a budget of $100. If the price of good X increases from 6 to 12, what is the new price

ratio? Show your work

What are the three approaches to measuring economic

activity? Why do they givethe answer

Let’s consider following choices that a policy maker face between the policy platforms – (3marks) i. A – (0, 250) ; B (250, 0) ; C (250, 350) - Discuss and compare the policy choices that policy maker is facing. Can you advocate any one of them over the other? Give reasons in support of your answer. ii. X – (0, 500) ; Y (500, 0) ; Z (700, 0) – Discuss and compare the policy choices that policy maker is facing. Can you advocate any one of them over the other? Give reasons in support of your answer. iii. If the policy maker is utilitarian, then combining the policy options of part i. and ii., what should have been the chosen policy? Explain your answer.

the Almighty offered Bruce to become as powerful as the Almighty himself, giving Bruce the right to make decisions about not only for his own life but also giving him the power to choose outcomes for the rest of the world. Considering that there are more than 2 individuals in this world including Bruce, the Almighty asked Bruce to choose amongst the following states of the world - one, where Bruce is the only person who is better off by 100 units, while everyone in the world is worse off and are getting an allocation of 10 (call this state of the world as ‘self-interest’); two, where everyone in the world is better off and each one of the individual is getting 100, except Bruce who has been made worse-off and is getting an allocation of 10 (call this state of the world as ‘philanthropy’). Bruce chose latter over former. Comment over the entire situation that Bruce is facing. Also, comment over Bruce’s choice and giver reasons explaining the rationale behind that choice.

Bruce had a rare encounter with the Almighty. The Almighty offered him 3 wishes of

his preference. Bruce very shrewdly chose these 3 things in that order – lots of wealth,

a popular life and never have to work again. The Almighty happily granted his three

wishes to Bruce. Few weeks down the line, with the spread of coronavirus, Bruce found

him to be affected by it. He has gone extremely pale and week, has lost his smell, has

lost his taste, can barely walk by himself. Not happy with what he has been going

through, he started blaming the Almighty for all this. Do you think that Bruce was

acting as a rational being? Why or why not, explain your answer.

9. Show that if the marginal product is always decreasing, the average product is always above the marginal

product.

Recent research estimates that the short-run price elasticity of demand for gasoline in the U.S. is -0.3, and the long-run price elasticity of demand is -1.4. What happens to consumer expenditures (in other words, price times quantity purchased) if the government increases the federal gasoline tax?

a. Consumer expenditures on gasoline increase over the short run and long run

b. Consumer expenditures on gasoline increase over the short run and decline over the long run

c. Consumer expenditures on gasoline decrease over the short run and long run

The effects on the equilibrium price and quantity of increase in income using the determinates that affect demand and supply

James Walker allocates his budget of $ 24 per week among three goods, A, B and C. Use the following tables of quantities (Q) and total utilities (TU) to answer the questions below:

QA TUA QS TUS QC TUC

1 50 1 75 1 25

2 90 2 135 2 45

3 120 3 175 3 60

4 140 4 205 4 70

5 155 5 225 5 77

i. If the price of A is $2, the price of B is $3, and the price of C is $ 1, how much of each does James Walker purchase in equilibrium?

ii. If the price of A rises to $ 4 while other prices and James Walker budget remain constant, how much of each does he purchase in equilibrium?

iii. Use the information from part (i) and part (ii) to draw the demand curve for good A. Be sure to indicate the quantity demanded for each point on the curve.