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The productive capability of an economy is such that to produce 5 units of military good it takes 2 workers to be employed while 10 units of consumer goods require 3 workers. Resources are limited in such a way that only 75 units of military good can be produced when all resources are employed.
a) How much workers are in the economy?
b) What is the maximum amount of consumer goods that can be produced?
c) Construct the production possibility schedule and curve for this economy.
d) Graphically represent what would happen if 12 additional workers were added
to the economy.
e) Graphically represent what would happen if the productivity of the workers
were reduced to 2 units of military good and 5 units of consumer goods.
f) Graphically represent what would happen if productivity for military goods
remained the same but it now required 2 workers to produce 10 units of consumer good
The productive capability of an economy is such that to produce 5 units of military good it takes 2 workers to be employed while 10 units of consumer goods require 3 workers. Resources are limited in such a way that only 75 units of military good can be produced when all resources are employed.
a) How much workers are in the economy?
b) What is the maximum amount of consumer goods that can be produced?
Problem 2 (Tracking, 5 points)
A monopolist sells a single good in two periods. There are two conumers who want to buy
one unit of the good in each period. The willingnessto pay of consumer A is 2, while the
willingness to pay of consumer B is 1.5.
a) Suppose the monopolist can only set one price in each period and cannot identify
consumers at all. What is the optimal price?
b) Suppose that the monoplist has indetified which consumers is A and B in period
two and can set different prices. What are the optimal prices?
c) Would the monoplist want to set a price of 2 in the first period, if he can identify
the consumer who bought the product in the next period. That is if he can track
who has bought in the first period. Assume for the moment that consumer A buys
in the first period at a price of 2.
Using a graph, explain carefully the difference between a movement along a demand curve and a shift in the demand curve
The market demand for brand X has been estimated as
where Px is the price of brand X, I is per-capita income, Py is the price of brand Y, and Pz is the price of brand Z. Assume that Px = $2, I = $20,000, Py = $4, and Pz = $4.
a. With respect to changes in per-capita income, what kind of good is brand X?
b. How are brands X and Y related?
c. How are brands X and Z related?
d. How are brands Z and Y related?
e. What is the market demand for brand X?
Colgate sells its standard size toothpaste for Rs. 25. Its sales have been on an average 8000 units per month over the last year. Recently, its competitor Sparkle reduced the price of its same standard size toothpaste from Rs. 35 to Rs. 30. As a result Colgate sales declined by 1500 units per month.
i) Calculate the cross elasticity between the two products.
ii) What does your estimate indicate about the relationship between the two?
Suppose the following demand and supply function:
Qd = 750 – 25P
Qs = -300 + 20 P
i. Find equilibrium price and quantity
ii. Find consumer and producer surplus
demand and supply equation for a perfect competition market are given as Qd=100-3P and Q's= 40 +P what will the firm's in that market take
5.The following results have been obtained from a simple of 11 observations on the values of sales (Y) of a firm and the corresponding prices (X).
Estimate the regression line of sale on price and interpret the results
What is the part of the variation in sales which is not explained by the regression line?
Estimate the price elasticity of sales.
6. Suppose that a researcher estimates a consumptions function and obtains the following results:
where C=Consumption, Yd=disposable income, and numbers in the parenthesis are the ‘standard errors’
Test the significant of Yd statistically using t-ratios
Determine the estimated standard deviations of the parameter estimates.
Suppose the inverse supply curve for good X is Px = 120 + 0.5Qs. If a 10% ad valorem tax is placed on Good X, what is the new inverse supply curve? If a $10 excise tax is placed on Good X, what is the new inverse supply curve?
