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Consider a market for Ice Cream an inferior good in Pakistan. For each of the given events,
identify which of the determinants of the demand or supply are affected. Also indicate whether
demand or supply increase or decreases. Then draw a diagram to show the effect on the price and
quantity of Ice Cream
(a) The local authority of Islington has £2 million to spend either on park maintenance or private goods. Each unit of park maintenance costs £10,000. (i) What is the maximum units of private goods that Islington can afford? What is the maximum units of the public good Islington can afford? At what units of public and private goods does Islington’s indifference curve over these two goods become tangent to its budget constraint? (ii) Now suppose that the central government decides to subsidize Islington’s purchase of park maintenance by providing the local authority with 1 unit of maintenance for every 2 units it purchases on its own. Will Islington purchase more or fewer units of park maintenance? Will Islington purchase more or fewer units of the private good? Explain. (Assume both private good and park maintenance to be normal goods.) (iii) What is the outcome if the central government instead provides a block grant such that the cost to the government is the same?
For market failure unit (market power). In the long run graph for monopolistic competition, firms are no longer earning abnormal profit due to low barriers to entry as there are more similar goods on the market, lowering demand, causing them to earn normal profits, however, shouldn't that cause MR to be equal to AR (demand curve), similar to the normal profit in perfect competition? Why is MR less than AR here when it is earning normal profit?
Inflation expectations are self-fulfilling if firms can adjust their prices very easily in response to economic news.
If the UK government paid a fixed subsidy to existing restaurants for each day on which they are open for business during the next three months this policy would increase the profits of restaurant owners and not change the price of restaurant meals.
An example of moral hazard in the market for university lecturers is that salaries are so low that only low-quality candidates apply for these jobs.
Is this true or false ? Why ?
How has COVID-19 affected a country’s ability to achieve production efficiency? Provide specific examples or describe how current production relates to an economy-wide PPF conceptually and graphically.
How COVID19 has affected the economic attitude, perception and knowledge about any pandemic of the people of Pakistan?
Consider a monopolist that sells a single good. The demand for the good is represented by the inverse demand function (price, p, as function of quantity, q) p = 10 − 2q. Suppose that there are no costs of production.
- Suppose that demand consists of individual consumers whose willingness to pay is given by the value of the inverse demand function. Suppose the monoppolist can identify whether a consumer has a willingness to pay below or above 3. The monopolist can set two different prices to the two resulting groups. Determine the demand for each of the two groups. Then calculate the optimal price for each group for the monopolist.
What is the theory of microeconomic principle that uses the concept of supply and demand to determine the appropriate price point for a good or service
