Search & Filtering
how to determine which fiscal or monetary policy is needed.
Consider a production function of the form
f(x1,x2) = x1α + x2α
with 0 < α.
1. For which values of α will this exhibit constant, increasing and decreasing Returns to Scale?
2. What is the TRS (Technical Rate of Substitution)?
3. What is the Elasticity of Substitution?
Now consider the CES (Constant Elasticity of Substitution) production function
g(x1,x2) = (x1α + x2α)1/α
4. What is the Return to Scale for the production function g?
5. What is the TRS and the Elasticity of Substitution for the CES production?
Prove that the utility approach and the indifference-curve approach yield the same consumer equilibrium. Consider two goods, A and B, to explain the utility approach and the indifference curve approach.
Assume you are the Minister of Finance and you need to raise revenue by taxing a specific good. Would you tax a good with high price elasticity of demand or one with low price elasticity of demand? Explain
Define dead weight loss of a tax. How do the elasticities of supply and demand affect the deadweight loss of a tax?
Market demand function is given by Qd = 180 – 2P
Market supply function is given by Qs = ‐ 15 + P
Determine producer surplus, consumer surplus and total economic surplus at the equilibrium price. Calculate the DWL that would result from a price floor imposed at a level of 72.
Profit-maximizing firms adjust their methods of production in response to changes in relative prices. This is known as the
Suppose the cross elasticity of demand for products A
and B
is +3.6 and for products C
and D
is −5.4.
What can you conclude about how products A
and B
are related? Products C
and D?
The widespread effects of the Covid-19 pandemic have been devastating and economically disruptive in South Africa. Covid-19 has defied what is deemed to be ‘normal’ in terms of conducting business. It is clear that the threat of Covid19 has affected the production of many commodities due to the stringent measures that have been put in place to contain the virus. The soft drink industry has almost come to a standstill. Most economic and social commentators feel that the Covid-19 pandemic effect on the economy is going to exacerbate widespread poverty, in an economy that is already highly unequal, as firms downsize, and people lose their source of income. Mention two (2) other factors that can cause each of the changes identified
The widespread effects of the Covid-19 pandemic have been devastating and economically disruptive in South Africa. Covid-19 has defied what is deemed to be ‘normal’ in terms of conducting business. It is clear that the threat of Covid19 has affected the production of many commodities due to the stringent measures that have been put in place to contain the virus. The soft drink industry has almost come to a standstill. Most economic and social commentators feel that the Covid-19 pandemic effect on the economy is going to exacerbate widespread poverty, in an economy that is already highly unequal, as firms downsize, and people lose their source of income. Using two (2) separate graphs, explain how the market for soft drinks will be affected by the issues mentioned in the case study
