Answer to Question #152857 in Economics for Hamza Ahsan

Question

Question 2
(a) What is the difference between a quota and a subsidy?
(b) Explain, using a demand and supply diagram, what effect is likely to occur in a market if the government introduces a subsidy in the production of a good.
(c) Discuss whether the elasticity of supply of manufactured goods is likely to be greater than the elasticity of supply of agricultural goods.
(d) Can a business change the price elasticity of its demand? If yes, how?
(e) How would the knowledge of PED and PES be useful for a farmer?
Question 3
Major news channel in the country reports that ‘Inflation has been kept at 2 % for the past year which is the lowest it has been for three years. Unemployment has also decreased.’
(a) According to this statement, what has happened to the price levels in the country over past three years?
(b) Explain what is inflation and how is it measured?
(c) Analyze why a reduction in interest rate may cause inflation?

Answer 1

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