Economics Answers

C=300+0.75Y, I=400, G=300,T=100

determine the equilibrium level of the income using expenditure and injection-leakage approach

Trial balance of GM as at 31 December 2021 Debit(RM) Credit(RM)

Sales 126,500

Purchases 99,850

Premises (cost) 100,000

Accumulated depreciation at 1 January 2021_Premises 25,000

Plant (cost) 18,000

Accumulated depreciation at 1 January 2021_Plant 2,300

Wages and salaries 8,900

Rent expense 7,500

Closing inventories RM12,500.

Capital at 1 January 2021 80,000

Drawings 25,000

Carriage inwards 4,000

Account receivables and Account payables 27,500 16,000

Bad debts written off 5,000

Other revenue 2,000

Cash at bank 18,950

Bank loan 30,000

300,750 300,750

Additional information at 31 December 2021:

i.Wages and salaries accrued amount to RM700.

ii. Rent prepaid amounts to RM300.

iii. Bank loan interest of 10 per cent per annum is outstanding.

iv. Provision for doubtful debt for account receivables of 2 per cent is to be made.

v.  Depreciation is to be charged at 2 per cent of cost on the premises and 10 per cent of cost on the plant.

prepare journals for adjusting entries of additional information i, ii, iii, iv.

Which of the following statements is/are incorrect in explaining the tax being treated as leakage in the circular flow of income between household and firms?

a) Tax is the part of income that is received by households but then paid to government.

b) Tax is taken out of the circular flow of income.

c) Households can spend it on goods and services.

d) Tax is an amount that is withdrawn or leaked from the circular flow of income.

Explain FIVE consequences of incorporation (10 Marks)

- State & Explain the importance of ALL the clauses found in the Memorandum of Association (10 Marks)

- What is your understanding of Constructive Notice (5 Marks)

The decision in Salomon Vs Salomon & Co Ltd gave rise to the Salomon Principle.

a. Explain FIVE exceptions to this principle under statutory provisions (10 Marks)

b. Explain FIVE exceptions to this principle under case law (10 Marks

Market Equilibrium 

Using the demand function, , and the supply function, , for coffee, 

Determine the equilibrium price and quantity of coffee if Y=$55, ps=0.20, and pc=$5. 

Draw the demand and supply curves and illustrate this equilibrium in a diagram.

1. Explain the difference between decrease in demand and decrease in quantity demanded, and using any product of your choice, briefly explain three factors that can cause decreases in demand for that product. 

2. Explain the difference between a price ceiling and price floor. Use two popular examples with well-labelled diagrams to explain.

3. Assuming that the market for Frytol cooking oil is currently in equilibrium (Demand equal supply). Briefly explain with aid of well-labeled diagrams how the following events will affect the equilibrium price and quantity of Frytol (in each case, start from a new equilibrium). 

a) Average incomes fall due to COVID-19. 

b) It is discovered that Frytol oil is good for adults.

c) A tax of 1.75% is place on Frytol. 

The hourly demand for music downloads is given by:

Q^d = 25 – 5P,

            where Q^d is the number of songs demanded per hour, and P is the price of downloading a song. 

Suppose that P = $3. At this price, what does the price elasticity of demand equal? What is the total revenue?

At what price does ε = 1? What is the total revenue when the price is $2.50?

Explain whether your results to part a and part b are consistent with the Total Revenue Test.

The following are the accounts’ balances of GM. at the end of December 2021.

Trial balance of GM as at 31 December 2021 Debit(RM)  Credit (RM)

Sales 126,500

Purchases 99,850

Premises (cost) 100,000

Accumulated depreciation at 1 January 2021_Premises 25,000

Plant (cost) 18,000

Accumulated depreciation at 1 January 2021_Plant 2,300

Wages and salaries 8,900

Rent expense 7,500

Inventories at 1 January 2021 5,000

Capital at 1 January 2021 80,000

Drawings 25,000

Carriage inwards 4,000

Account receivables and Account payables 27,500 16,000

Bad debts written off 5,000

Other revenue 2,000

Cash at bank 18,950

Bank loan 30,000

300,750 300,750

Additional information as at 31 December 2021:

i.       Closing inventories is RM12,500.

ii.     Wages and salaries accrued amount to RM700.

iii.   Rent prepaid amounts to RM300.

iv.   Bank loan interest of 10 per cent per annum is outstanding.

You are required to prepare the following for GM:

a)   Statement of Comprehensive Income for the year ended 31 December 2021.

You win $100 in a basketball pool. You have

a choice between spending the money now or

putting it away for a year in a bank account that

pays 5 percent interest. What is the opportunity

cost of spending the $100 now?