Economics Answers

Linda loves buying shoes and going out to dance. Her utility function for pairs of shoes, S, and the number of times she goes dancing per month, T, is U(S,T)=2ST. It costs Linda $50 to buy a new pair of shoes or to spend an evening out dancing. Assume that he has $500 to spend on clothing and dancing.
a) What is the equation for her budget line? Draw it (with T on the vertical axis), and label the slope and intercepts.
b) What is Linda’s marginal rate of substitution? Explain.
c) Solve mathematically for her optimal bundle.
d) Show how to determine this bundle in a
diagram using indifference curves and a budget line.

Robert Ryan General manger Chicago stars professional football team is currently negotiating a new contract with Ronnie smith, the team's star running back. Under league rules smith is now a free agent, which means that he is free to negotiate a contract with any other team in the league. Smith has presented Ryan with a final contract demand consisting of alternatives for a five year contract. If Ryan does not agree to one of these, smith will sign contract with another team. The alternative contract demands are:
A) A $2000, 000 bonus payment immediately, a payment of 500,000 dollars at the end of each of the next five years, and a deferred payment of 1000,000 at the end of fifth year of the contract.
B) A $500,000 bonus payment immediately, a payment of 300,000 dollars at the end of each of the next five years, and a deferred payment of 200,000 each payable at the end of years 11 through 20.
Ryan has determined that smith's value to the team over the next five years is about 3000,000 dollars (in terms of present value of additional revenue from gate receipts and television discounted at 12% per year) should Ryan accept one of smith's contract demands, if so, which one? Explain fully.

the demand equation is estimated to be 50 - 3p + 2po where po is the price of other good. assume the average value of P is $3 and the average value of po is $6.
a. what is the price elasticity at the average values of P and Po? how should the price of the good can changed to increase total revenues?
b. what is the cross elasticity at the average values of P and Po? what is the relationship between the two goods?
c. if equation is correctly estimated is good inferior a necessity or a luxury? Explain.

How can the San Diego Padres, one of the weakest teams in the National League from a wins-losses perspective, be one of the most profitable?

What is the VAT amount on an item that sells for £8.50

Lucas’ point of view, what are the limitations of the Keynesian model? What improvements does he suggest?

the demand equation is estimated to be 50 - 3p + 2po where po is the price of other good. assume the average value of P is $3 and the average value of po is $6.
a. what is the price elasticity at the average values of P and Po? how should the price of the good can changed to increase total revenues?
b. what is the cross elasticity at the average values of P and Po? what is the relationship between the two goods?
c. if equation is correctly estimated is good inferior a necessity or a luxury? Explain.
Expert's answer

Explain. Use graphs when appropriate.

Suppose the tax rate on the first $20,000 of income is 20%, and on any income above that is 25%. This tax is progressive. [Hint: Consider two taxpayer, one earning $20,000, and the other $40,000.]

The direct and excess burdens from an excise tax are greater the less elastic is demand in the market. [Hint: Assume perfectly elastic supply.]

Recently, the yield (annual nominal interest rate) on government 10 year bonds was 1.67% in Canada and 1.97% in the US. If we ignore any potential exchange rate changes and assume that bond traders ensure equal real interest rates in the two countries, then we can expect annual inflation to be 0.30% higher in the US over the next ten years.

Assuming that exchange rates are consistent across currencies, then if the Canadian dollar exchange rate with the US dollar and the US dollar exchange rate with the Euro are both equal to 1.18, then the Canadian dollar exchange rate with the Euro is equal to 1.00.

Suppose that Ian and Mike are cottagers on opposite sides of a small lake. Ian values electricity at his cottage at $500 and Mike at $700, but in order to get electricity for their properties a trunk line costing $1000 must be built. If they are unable to negotiate the trunk line will never be built, but if they can costlessly negotiate to split the costs, it will be built.

Distinguish between pure strategy Nash equilibrium and mixed strategy equilibrium. When would you use mixed strategy equilibrium? (b) Find all the Nash equilibrium of the following game: Player 2 Left Right Player1 Up (5,4) Down (1,3) (4,1) (2,2)