Microeconomics Answers

All Inferior goods are Giffen goods.

Show how the migration of workers from country A to country B will affect the labour supply, labour demandand the equilibrium wage of bothcountries.

What is production possibility frontier ? Explain through diagram.

Given that utility function=10x1^0.6,x2^0.4, where U=f(x1,x2) given Px1=10 ,px2=20, and Px3=1000 are units of proces x1 and x2,while B is money income.Required,Interpret the utility function,Construct budget constraint function,derive demand curvea for x1 and x2and prove they are actually demand curves then compute maximum utility given the income and prices of x1 and x2

Discuss 2 determinants each of the price elasticity of demand and the price elasticity of supply.

If government imposes a maximum price of 48, calculate the resulting

shortage and discuss on its effectiveness of such a policy 

In Rwanda local farmers manage small plots of land for subsistence farming. However, some have benefited by selling pineapples at an agreed fixed price to an exporter. The exporter provides finances, training, fertilizers and machinery and even building materials for the farmer’s homes. Explain the benefits which may be gained by the local community in Rwanda from the project.

Apple and Samsung both make mobile phones and tablets using labour as an input. The amount of labour hours needed to produce one unit of each type of device is as follows: Hours per unit Mobile Phone Tablet 2 5 Apple Samsung 5 7 Let 14 and 14 denote the labour employment by Apple in the production of mobile and tablet, respectively. Similarly, lm and 1 denote the labour employment by Samsung in the production of mobile and tablet, respectively. It is further given that lm + 14 = 70 and le+ 1 = 70. i. Calculate opportunity cost of each type of device for each company and show that Apple has comparative advantage in producing mobile phones. ii. If each company divides equally the labour available in the production of the two devices, what's the total production of each device in the economy? (2) iii. Suggest an allocation of labour for both the companies such that the total production of each device is higher than that in part (ii). (2)

economies of scale

Suppose that people derive utility from two goods—housing (H) and all other consumption goods (C).

a. Show a typical consumer’s allocation of his or her income between H and C.

b. Suppose that the government decides that the level of housing shown in part a (say, H*) is ‘‘substandard’’ and requires that all people buy H** > H* instead. Show that this law would reduce this person’s utility.

c. One way to return this person to the initial level of utility would be to give him or her extra income. On your graph, show how much extra income this would require.

d. Another way to return this person to his or her initial level of utility would be to provide a housing subsidy that reduces the price of hous- ing. On your graph, show this solution as well.