Economics Answers

(a) Briefly outline why the value of the Australian dollar may change against the US dollar in the (FOREX) foreign exchange market. Explain how the movement in the Australian dollar
would affect Australia’s export and import prices

To reduce the consumption of sugary soft drinks, suppose the government imposes a $2 per-unit sales tax on soft drinks.per-unit sales tax on soft drinks.
Will the price of soft drinks increase by the full amount of the sales tax? Explain.
Calculate the tax revenue the government can collect from the sale of soft drinks. Show your work.
Will the consumer surplus increase, decrease, or stay the same after the tax?
Calculate the deadweight loss created by the tax. Show your work.

) Matthew is an addicted coffee drinker and proud patron of Starbucks, so he keeps an eye out on the prices of coffee. He finds out that Starbucks increases its price of a grande frappuccino from $3.50 to $4.00, so he expects many patrons to consume less grande lattes from 2 to 1 per week, and to find an alternative. He lives by a Coffee Bean and Tea Leaf café and his opportunity for a grande frappucino is a medium ice blended. He plans to consume more medium ice blended drinks increasing his quantity demanded from 1 to 5 per week. What is the cross price elasticity of demand for a medium ice blended drink with respect to a grande frappuccino’s price?

You can buy a machine for $100,000 that will produce a net income, after operating expenses, of $10,000 per year. If you plan to keep the machine for four years, what must the market (resale) value be at the end of four years to justify the investment? Assume interest rate at 15%.

With the aid of a diagram , discuss the welfare effect of this new legislation if the new wage is below equilibrium and above wage rate with labour hours as quantity varaiable.

A market consists of three consumers whose demand curves are: P= 35-0.5Qa; P= 50-0.25Qb; and P= 40-2Qc. Calculate the market demand for the commodity and the equilibrium output and price if the supply function is given by Qs= 40+3.5P. (8 marks)

A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. What is the value added by each person? What is GDP?

. Inflation is likely to…
[1] reduce the cost of living.
[2] raise the standard of living.
[3] reduce the purchasing power of a currency.
[4] increase the purchasing power of a currency.

Now assume that for some reason Aggregate Demand shifts to the left (downwards) and suppose wages fully adjust. By using the AS-AD graph, show the effects of this shift on the equilibrium output and price level in the Short-Run and in the Long-run.

Now assume that there is an increase in government expenditure (G), an increase in the labour force and a reduction in oil prices. By using the AS-AD graph, explain the effects of these changes on equilibrium output and equilibrium price level in the Short-Run. Explain each step in your graph.