Microeconomics Answers

Discuss whether the government should directly provide good and services in the economy

Learning Journal Unit 1

Respond to the following question with three well composed paragraphs:

Does the fact that something is abundant mean it is not scarce in the economic sense? Why or why not?

d. As the price of chicken decreases, the demand for beef decreases (assume chicken and beef are substitutes goods). true or false

c. The population of Malaysian increases and as a result the demand for goods and services will increases. true or false

Question 3
Compare the impact of a recession that reduces consumer income by 5 percent on the
consumption of durable goods and house rentals. Suppose that the income elasticity of
demand for durable goods is 1.5 and the income elasticity of demand for house rentals is 0.3.
Based on your response, make a policy argument to support through government funding
either businesses or house rentals.
Question 4
Using a supply and demand analysis show first the labour market in equilibrium, and then
show
a) the effect of a reduction in the demand for labour as a consequence of a pandemic.
b) The effect of a government subsidy to producers to restore the employment of labour.
Provide a diagram with clear axis details. Make sure to explain what sort of assumptions you
are making on the elasticities of demand and supply.

Using a production possibilities frontier (PPF) diagram, determine how does the PPF change
in response to the following events:
a) A relaxation of policies allowing more foreign direct investment into the country
b) Increasing the minimum wage level
c) A decrease in expenditure on research and development
d) An increase in the retirement age
e) Government policies supporting the provision of services, without affecting
manufacturing

Differentiate between the various aims of appraising projects.

They are contemplating the acquisition of a machine at a cost of R234 000.
The probabilities of its life expectancy are as follows:
10 years 0.2
11 years 0.5
12 years 0.3
For a premium which will be payable in addition to the purchase price, the supplier of the
machine is prepared to guarantee that the machine will last at least 11 years.
The machine produces a single product with a selling price of R12 per unit and variable
cost of production of R7 per unit.
The probabilities of the following production volumes are:
5 000 units per annum 0.1
6 000 units per annum 0.3
7 000 units per annum 0.6
The present value of R1 per annum at the company’s screening rate for capital
projects is as follows:
10 years R6.71
11 years R7.13
12 years R7.52
Required:
a) Advise the management of Lota Ltd on whether they should acquire the machine. (14)
b) Calculate how much Lota Ltd can afford to pay by way of a premium in the first year
for a guarantee that the machine will last 11 years. (6)