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5. Suppose a consumer has income of 200 birr per month and he wants to spend
all of his income on two goods- X and Y whose prices are birr 4 and birr 5
respectively. Based on this information answer the following questions:
a. Express the budget line of the consumer both algebraically and
diagrammatically.
b. Compute the equation of the budget line.
c. Determine the slope of the budget line and interpret the result
e. What will happen to the original budget line?
A cycle and a radio together cost 1200.if the former rises by 20% and latter by25%.the two together code 1460.find their former prices
Plot graph of
Qd=20-4p, where p=#2,4
Qs=12+3p, where p=#2,4
Suppose a consumer’s preference (utility function) is represented by: 0.25 0.75 U X Y ; where U is total utility
of the consumer derived by consuming commodity X and Y. The price of X is Birr 4 while the price of Y is
Birr 2, and the consumer’s money income is Birr 1600. Then:
a. write the budget line equation and determine its slope
b. determine the marginal utilities for both commodities
c. calculate the optimal consumption bundle mathematically
d. calculate the income shares of both commodities
The demand and supply for chocolates in country A is given by P=B00-0 and PO respectively Country A, a small economy is in autarky.(5) a) Suppose country A opens up to international trade If the world price for chocolates is $200, calculate equilibrium price and equilibrium quantity. b) Graphically show the change in consumer and producer surplus when country A opens to trade
A consumer has an income of $3000. Wine costs $3 per giass and cheese.an inferior good costs $10 per pound. The price of cheese fails from $10 to $6 while the price of wine remains the same, If the income remains constant, what wil happen to the consumption of wine and cheese Decompose into income and substitution effect
Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank’s action on the interest cash rate ripple through the economy and lead to the target policy goal. (Three connected diagrams should be used: (1) money supply and demand (2) investment demand schedule (3) AS/AD diagram. Interest rates is the variable that connects the first and second diagram)
Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of an increase in government spending and a decrease in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis
a) Give the definition of GDP and explain what items are not included in its calculation? b) How is GDP calculated using the expenditure approach? c) How is GDP calculated using the income approach? d) Explain the problem of "double-counting" and how it can be avoided in calculating GDP
Study the given case carefully and answer the questions asked at the end.
In 1997, over $70,0000 million purchases were charged on credit cards, and this total is increasing at a rate of over 10 percent per year. At first glance, the credit card market would seem to be a rather concentrated industry. Visa, Master Card, and American Express are the most familiar names and over 60 percent of all charges are made using one of these three cards. But on closer examination, the industry seems to exhibit most of the characteristics of perfect competition.
a. What type of market is the American credit card market? And why? Explain. (10 Marks)
Do you believe that a new firm in the industry finds a difficulty to enter? Why? Give reasons.
