Economics Answers

Give the utility function U (x1, x2) = a * x2 * x1 + x1 where x1 and x2 conditions quantities consumed of two goods a = number letters surname last name / number letters first first name. It is known that the vector of the best unit prices of the two goods is (3 2) and the consumer's income is 1800 p.m.

 Q. Determine the function of uncompensated demand for both goods. What happens to the consumer's utility if his income increases by 1 p.m. 

If consumption function is given as c= $25+0.8Y where yd=y-t ,tax rate=10% investment=$50 calculate equilibrium level of income as well as the government expenditure multiplier.

Use the aggregate demand aggregate supply model to explain how an expansionary monetary policy can affect output/income.

8. Assume that a competitive firm sells it’s output for a price of 16 dollars per unit and

producing q units of output costs the firm 1/3q³ dollars. The firm’s production process

pollutes a nearby river and total environmental damage caused is e = 3q − a where

a is the amount of pollution abatement effort. The firm’s cost of abating a units of

pollution is 1/3q³.

(a) Find the firm’s profit maximizing output quantity and the resulting amount of

environmental damage in the absence of any regulation.

(b) If the firm must pay a tax of $7 per unit of output produced, find the new profit

maximizing output quantity and amount of environmental damage.

(c) Assume there is public backlash to the tax on output, so the government needs

to determine what subsidy per-unit of abatement effort would replace the tax

and yield the same environmental damage. What subsidy on abatement effort

should the government set?

what is the meaning of isocost slope? Provide a mathematical explanation.

Jane bought 100 shares. She sold the shares after 2 years at the price of 20. Over the 2 years, the company paid dividends of £1 and £1.50 per share each year. The interest rate remained the same for 2 years at 10%. What would be the current fair price for the stock?

what happens to the exchange rate in south Africa if there is an increase in the volume of exports to the USA

Country A and B are two main trading partners. A sells mainly raw materials to B, while B sells mainly consumption goods to A. There was a major technological breakthrough in the extraction technology which drastically reduced the cost of production in country A 

Describe the initial set-up between the two economies       (5 mks)

Analyse the effects of thee change on the two economies       (5 mks)

An open economy with a chronic deficit in the current account as well as in the governments budget. To address the problem the government proposes to cut spending and curtail all public purchases from abroad.

Explain why the government concerned.       (2 mks)

Describe effects of the proposed policy on an economy where there is no capital mobility and there is a fixed exchange rate policy.       (8 mks)

Consider the following model of National Income determination

              C= 3000 +0.75 (Y-T)

              T=1000

               I= 4750

              G=1500

              Y=E=C+I+G

Required:

Solve for the equilibrium values for all the endogenous variables              (4 mks)

Suppose government expenditure increases by 50 find the new equilibrium values of the endogenous variables                                                (4 mks)

Calculate the value of the government spending multiplier                   (2 mks)