Microeconomics Answers

With the aid of a diagram reference use the model of demand and supply to explain what happens when government imposes price floors?

A marketing firm wishes to maximize the total amount of revenue it receives from two markets. In the first market demand is p1(q1)  200 – q1 and in the second market demand is p2(q2)  200 – q2. The firm faces a constraint that the quantities allocated must sum in total as follows q1 + q2 = 200. Using the Lagrangean method, derive the optimal allocation of quantities (q1*,q2*) across the two markets. (15 marks)

For the utility functions:

A: U(x1, x2)  x11/2 x2
B: U(x1, x2)  min{ ½ x1, x2 }
C: U(x1, x2)  ½ x1 + x2
1. Derive the consumers optimal consumption at the budget B(p1,p2,m) = (1,1,100).
2. Derive the consumer’s optimal consumption at the budget B(p1,p2,m) = (1,2,100).
(10 marks)

Q5: (a) Suppose that in Year 1 a firm produces 5 cars valued at $10,000 each. It has contributed $50,000
to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price
changes allows us to see more clearly whether or not there have been output changes.

Q5: (B) Assume a car dealer in Pakistan imported 20 cars directly from Japan at a cost of Rs.500,000 per
car in 2005. By close of year 2005, 15 cars were sold at Rs.600,000 per car. The remaining 5 cars were
sold in 2006 for Rs.550,000 each. How are the GNP and its major components affected in 2005 and in
2006 through this transaction?

In a hypothetical economy, without taxes, the consumption(C) at different levels of real GDP (Y) is
given here under:
Real GDP Consumption (Rs in Billion)
(Y) (C)
3,000 1,500
5,000 3,000
Determine the size of MPC (Marginal propensity to consume), MPS (Marginal propensity to save) and multiplier

find a newspaper article that deals with a change in supply and demand for a product illustrate the changes described in the article with a supply and demand graph

Q:4 based on figure below if the price is 4,6 and 8 how it will affect the quantity demanded and quantity supplied?

Q:2 Find a newspaper article that deals with a change in supply or demand for a product. Illustrate the
changes described in the article with a supply-and-demand graph.

you graduate from collage and are offered three jobs (jobA, jobB, jobC). assume that they are identical in all respects (duties, benefits, promotion, prospects and so on ) expect that the salaries differ as shown below
jobA $150,000
jobB $120,000
jobC $ 100,000
first which of three jobs would you choose? no you can not have all three because you have made a choice you have incurred an opportunity cost what is the opportunity cost of your job choice? comparing benefits and costs have you made a rational choice?

The U.S. government’s “war on drugs” mainly focuses on restricting supply. This drives up prices
and reduces quantity demanded. However, demand for many drugs is price inelastic. That means quantity
demanded does not drop as much as the price rises. The net effect is higher total revenue to drug
producers. Illustrate the said scenario in a graph.
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