Economics Answers

1. The owner of a health club asks you for advice about whether the company should raise the price of its membership this year based on the following information: last year the club raised the price of its membership by 5% and the number of members paying the same fee fell by 7%.


2. The Metropolitan Transit System recently announced a 50% increase in the price of a transit ticket. The administrators said that they needed an increase in revenue to cover their rising costs. Explain the economic rationale for this decision.

From the following data in Table 1, supply the given requirements:

Table 1
Demand Schedules for Rubber Slippers

Price
30
25
20
15
10
5
Qd
5
15
20
45
75
100




Plot the demand curve.
Explain the graphical implication of the demand curve

Explain why a Walrasian equilibrium allocation is Pareto Efficient. How useful is this observation as a guide to policy?

1. Suppose the government cuts transfer payments in an economy with an inflationary gap. How would this policy affect bond prices, interest rates, investment, the exchange rate, net exports, real GDP, and the price level? Show your results graphically.

2. Given the nature of the implementation lag discussed in the text, discuss possible measures that might reduce the lag.

3. Federally funded student aid programs generally reduce benefits by $1 for every $1 that recipients earn. Do such programs represent government purchases or transfer payments? Are they automatic stabilizers?

4. The text notes that changes in oil prices can affect the inflation-unemployment outcome. Explain what effect changes in oil prices may have on these two variables.

The value of the multiplier associated with changes in autonomous spending is given by k.
a) Find the value of the multiplier when MPC=0.50, 0.75 and 0.80.
b) What is the relationship between the value of the multiplier and MPC?
c) Find the change in equilibrium level of output when there is a k10 000 increase in investment spending and MPC=0.50, 0.75 AND 0.80.

At 31 December 2005 the capital structure of Dompo, a limited liability company, was as follows:
1,000,000 ordinary shares of GHS 1 each Share premium account
Revaluation reserve
Retained earnings
GHS 1,000,000
200,000 100,000 50,000
The authorized share capital of the company was GHS 1,000,000.
The directors of the company are considering the following proposals. None of them is a qualified accountant:
a. Making a bonus issue of one ordinary share for every two held, in order to raise GHS500,000 for the company.
b. Paying a dividend of 10p per share
c. Increasing the revaluation reserve to GHS 300,000 by revaluing goodwill from GHS
800,000 to GHS 1,000,000.
d. Combining all reserves into a single figure.
Comment on the validity of these proposals.

given the following information U(x y)=x^0.5,y^0.5,the initial price of good X is $10 and good Y is $5:consumers income $1000.calculate the optimal bundle at initial bundle with good X on horizontal axis

you are interested in buying a new cell phone and consumers are willing to pa y 3000.the demand function for acellphone is Qd=1500-0.5P and supply function is Qs=500+0.5P.if the market price increases by 25% and the quantity sold decreases by 12%,calculate the new consumer's surplus"

You are interested in buying a new cell phone and consumers are willing to pay N$3 000.00.
The demand function for a cell phone is Qd = 1500 - 0.5 P
The supply function is Qs = 500 + 0.5 P
a) Calculate consumers surplus.
b) if the market price increases by 25 % and quantity sold decreases by 12 %, calculate the new consumer surplus.

Suppose the current interest rate is 5% what price should one expect to pay for a $1000 treasury bill, due to mature in one year, which ha originally been sold when interest rate was 10%?