Economics Answers

Suppose the consumption function is C=100+0.95YD. If the tax rate changes from t=0 to t=30%, then the increase in govt spending that leaves equilibrium income unaffected is what ?

YD= disposable income

The answer is 570 , but can you help explain how they got to this?
Tks

The demand for ice cream cones is P=1600 and Qd is 2
The supply of ice cream cones is P =400 and Qs is 1. The price of a cone is expressed in cents, and the quantities are expressed in cones per day. To find the equilibrium price (P*) and the equilibrium quantity (Q*), substitute Q* for QD and QS and P* for P. (8 marks). (FOR QD, P=a-bQd and for QS, P=c+dQS).

what is the GDP deflator,and how does it differ from the consumer and producer price indexes?under what circumstances might it be a more useful measure of price than CPI and PPI?

n the labour market for carpenters, the current market clearing wage rate is R800 per day. With the
aid of a diagram, discuss the welfare effects of government intervention in the form of legislation that
sets the minimum wage rate for a carpenter at R1000 per day.

2. The demand and Supply Schedules for potato chips are:
Price(rand per bag) Quantity demanded(millions of bags a week) Quantity Supplied(millions of bags a week)
5 160 130
6 150 140
7 140 150
8 130 160
9 120 170
10 110 180


a. Draw a graph of the potato chip market and mark in the equilibrium price and quantity. (10 marks)
b. if the price is R6 a bag, is there a shortage or a surplus and how does the price adjust? (5 marks)

Find the equilibrium of income level and interest rate and the level of C, I, Mt and M2 in equilibrium value: C=81²+0.6Y, I= 120-150i, Ma= 275,Mt= 0.1Y and M2= 240-250i

Investors require a minimum rate of return of 10% on all capital invest- ments, and both equipment and structures depreciate at a rate of 15% per year. Firms are 100% equity financed. In what follows, assume that the opportunity cost of equity finance is not deductible for tax purposes.
In the initial setting, the corporate tax rate is 50% and investment in equipment can be expensed (written off immediately) for tax pur- poses, while investments in structures are written off on a declining balance basis with tax depreciation allowances equal to true economic depreciation.

Determine the equilibrium values of the pre-tax marginal prod- ucts of equipment and structures in this setting. What are the marginal effective tax rates on equipment and structures respec- tively?

In the labour market for carpenters, the current market clearing wage rate is R800 per day. With the aid of a diagram, discuss the welfare effects of government intervention in the form of legislation that sets the minimum wage rate for a carpenter at R1000 per day.

in the labour market for carpenters, the current clearing wage rate is R800 per day. with the aid of a diagram, discuss effects of government in the form of legislation that sets the minimum wage rate for a carpenter at R1000 per day

Use a work leisure diagram that includes non-labour income to portray an Individual who is maximizing utility by working say, 8 hours per day.
Now compare the labour supply effects of imposing (a) a lump sum tax that is the same absolute amount at all levels of income earned; and (b) a proportional tax of say 30 percent on earned income.
A. Use one graph each to illustrate effect of each type of tax on labour supply.
B. Describe the income and substitution effects on hours of work for each tax
C. Do hours of rise or fall in each case?
D. Can you generalize these outcomes for all individuals in the economy? Why or Why not?