Economics Answers

Price

Quantity demanded

Elasticity coefficient

10

10,000

-

9

13,000

-2.47 

8

17,000

7

22,000

6

25,000

use the arc or midpoint elasticity formula to calculate the elasticity coefficients when price changes from

1. 10 to 9
2. 9 to 8
3. 8 to 7
4. 7 to 6

1. What would the LM curve look like in a classical world? If this really were the LM curve that we thought best characterized the economy, would we lean toward the use of fiscal policy or monetary policy? (You may assume your goal is to affect output.)

2. Show, using IS and LM curves, why money has no effect on output in the classical supply

case.

1. Discuss, using the IS-LM model, what happens to interest rates as prices change along a given AD schedule.

2. What is crowding out, and when would you expect it to occur? In the face of substantial

crowding out, which will be more successful—fiscal or monetary policy?

Madison Inc. has bought 51 000 USD worth of calculators (inventory) on account for resale in the local market. Freight expenses were 2 000 USD. Payment terms was 4/10 n/40. The company had 3 000 USD allowances because some calculators were broken while shipping to the company. The company paid for the inventory on the 5^th day of the contract (within the discount period). Considering this information alone calculate the balance in the inventory account for this transaction and show your work.

Analyse how an increase in exports could improve a country’s economic performance.

A monopolist with the cost function c=½q² faces demand curve q=12-p

A. What will be his equilibrium price and quantity ?

B. If the some reason the firm behaves as if it were in a perfectly competitive idustry, what will equilibrium price and quantity ?

c. How much money will the firm require to forgo monopoly profits and behave competitively instead ?

1. Consider the Earned Income Tax Credit policy described. All else equal, what is the implication for labor supply if:

a. The EITC supplement rate increases from (about) 30% to 60%?

1. Consider the Earned Income Tax Credit policy described. All else equal, what is the implication for labor supply if:

a. The EITC supplement rate increases from (about) 30% to 60%?

Using diagrams and the concept of elasticity of demand to support your answer, explain how both UK rail companies and airways go about filling seats in order to maximise revenue

Consider an employee who does not receive employer-based health insurance and must divide her $1,000 per week in after-tax income between health insurance and “other goods.” In the graph below, draw this worker’s opportunity set if the price of health insurance is $200 per week and the price of “other goods” is $100 per week. On the same graph, draw this worker's opportunity set for the case where the employer agrees to give this employee $200 worth of health insurance per week (under current tax laws, this form of compensation is nontaxable).

Would this employee be better or worse off if, instead of the health insurance, the employer gave her a $200 per week raise that was taxable at a rate of 25 percent? Explain.