Economics Answers

Suppose the residents of Vegopia spend all their income on cauliflower (CF), broccoli
(B)and carrots (C). In 2010, the base year, they buy 100 heads of cauliflower for $200,
60 bunches of broccoli for $90, and 500 carrots for $50. In 2011 they buy 75 heads of
cauliflower for $225, 80 bunches of broccoli for $120, and 500 carrots for $100.
(a) Calculate the CPI for (i) 2010 and (ii) 2011.
(b) Calculate the inflation rate.
(a) The CPI in the base year 2010 is 100.
The CPI in 2011 is as follows:
CPI(2011) = Cost of basket at current prices (2011) x 100
Cost of basket at base year prices (2010)
The basket is the base year quantities (ie. CF = 100, B = 60 and C = 500)

Recently in Sweden, due to the discovery of bird flu the demand for live chicken decreased. This was, at the same time, followed by the Swedish government taking precautionary measures and culling 50 percent of the live chicken stock in the country. Using demand and supply graphs illustrate and explain the impact on price and quantity in the market for live chickens?

Increase in demand, decrease in supply. What happens to equilibrium price and quantity?

5. For the following situations, identify the type of unemployment each represents.

a. Because of the decline in the U.S. birth rate, baby clothes manufacturers are laying off workers.

b. Bill decided to relocate to Texas. He quit his present job and found a new job in Texas three weeks later.

c. As interest rates continue to rise, the sale of new homes decreases. This has caused an increase of unemployed construction workers.

d. As the fall harvest ends, agriculture unemployment increases.

e. Janet worked in the drive-up window of a bank. The bank has installed an automated teller machine and has closed the drive-up window. Janet's job no longer exists, so she has to start looking for another job.

f. The state of Missouri has enacted a law stating that no one under the age of 21 can work in an establishment that sells liquor. Mark, an 18-year-old, was working as a waiter in a restaurant that sells alcoholic beverages. He can no longer work at the restaurant.

Peanut crops have been destroyed by a fungus. Consumers are substituting almond butter for peanut butter because they perceive it to be a healthier option. The prices of both peanut butter and almond butter are rising. Why?

If the market demand and supply function are given as dlqd+5p=120 qs=11p- 80 then what are the market clearing price and the crossponding quantities ?

A typical family living on Rabbit Island consumes only apple juice, bananas, and cloth. Price in the base year are $4 a litre for apple juice, $3 a kilogram for bananas, and $5 a metre for cloth. In the base year the typical family spends $40 on apple juice, $45 on bananas, and $25 on cloth. In the current year, apple juice cost $3 a litre, banans cost $4 a kilogram, and cloth costs $7 a metre. Calculate the CPI on Rabbit Island in the current year and inflation rate between the base year and the current year.

Suppose that the firm that printed your Macroeconomics textbook bought the paper from XYZ paper mills. Was the purchase of the paper part of the GDP. If not, then how the value of paper was counted in the GDP.

The consumption rate of a certain item in a company is 100 units/day. The ordering cost per order is Rs.100 and the average daily holding cost per unit is 2 paise. Determine the economic order quantity for placing an order. Also, find the total cost per unit time (TCU) and the cycle time.

What is effort that a person devotes to a task in order to get paid?