Microeconomics Answers

measure (8) of economic growth

Choose any one of the tools from Question 4.1.1 and elaborate on the application of this tool in your country. (6)

Explain the two (2) main tools of fiscal policy.

The population in countrv C decreases. due to a lower birth rate. At the same time, there is an increase in the

cost of fertilizer, which is used to grow vegetables. Explain how the market tor vegetables will be attected by

these changes. Clearly indicate how the equilibrium price and equilibrium quantity will be affected by these

changes. Make use or a combination or diagrams and verbal explanation to explain vour answer. Note that Vour

diagrams should be properly annotated and that marks will be deducted for any missing labels on our diagram.

Quantity larger than the equilibrium of supply and demand is inefficient for the marginal buyers willingness to pay is

Given the following market demand function for the commodity X Q=f(P,, P., P, I.T.A)

where

P= Price of the commodity X P= Price of a substitute commodity Y

P= Price of commodity Z which is complement of X

1 = Level of per captia income of consumers T=Tastes and preferences of consumers A = Advertising expenditure by a firm producing X

How will the market demand for a commodity change? (1) if price of the commodity X rises,

(ii) if price of the substitute good Y rises, (iii) if price of complementary commodity Z falls,

(iv) per capita income (I) of the consumers rises,

(v) the firm producing X increases its advertisement expenditure.

Suppose that with a budget of $200, Deborah spends $120 on sushi and $80 on bagels when sushi costs $2 per piece and bagels cost $2 per bagel. Then, the price of bagels falls to $1 per bagel.

Defi ne carefully what is meant by a demand sched-ule or curve. State the law of downward-sloping demand. Illustrate the law of downward-sloping demand with two cases from your own experience.

Using supply and demand diagrams, show the effect of the following events on the market for sweatshirts.

a. A drought in Egypt damages the cotton crop.

b. The price of leather jackets falls.

c. All universities require students to attend morning exercise classes in appropriate attire.

d. New knitting machines are invented

 Explain each of the following statements using supply and demand diagrams.

a. When there is a drought in southern Europe, the price of soft fruit rises in supermarkets throughout Europe.

b. When a report is published linking a product with an increased risk of cancer, the price of the product concerned tends to fall.

c. The United States announces that it intends to impose new sanctions on the Islamic Republic of Iran. The price of petrol in Europe rises and the price of a used Mercedes falls.