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The following equations describe an economy. (Think of C, I, G, etc as being measured in billions and I as a percentage; a 5 percent interest rate implies i = 5.)
C = 0.8(1 – t)Y
t = 0.25
I = 900 – 50i
G = 800
Md/P = 0.25Y – 62.5i
Ms/P = 500
Derive the equations that describes the IS and LM curves?
What is the equilibrium level of income and interest rate?
Give three explanations why the real wage may remain above the level that equilibrates labor supply and labor demand.
Country A and country B both have the production function Y = F(K, L) = K1/2L1/2.
Does this production function have constant returns to scale? Explain.
What is the per-worker production function, y = f(k)? [Hint: use the solow model]
True or False
6. Companies infrequently take advantage of purchase discounts because they amount to so little savings.
7. Periodic inventory systems are, in general, less expensive to operate than perpetual systems.
8. In a periodic system, cost of goods sold is the difference between what a company has available for sale (beginning inventory and purchases) and what they didn’t sell (ending inventory).
9. Companies only follow the “lower-of-cost-or-market” guideline if they use a periodic inventory system.
10. The “purchases” account is not used in a perpetual inventory system.
True or False
1. If the market value of a company’s inventory increases, the company should record a gain.
2. A company should include costs of transporting an item to its store when determining the cost of the item.
3. A company that uses a perpetual inventory system should still perform a physical inventory count.
4. In a perpetual system, but not a periodic system, cost of goods sold is determined and recorded at the time of sale.
5. If inventory is shipped FOB shipping point, the buyer takes title as soon as the inventory leaves the seller’s warehouse.
Explain the effects of rent control in the short and the long run. Why and
how do the effects vary over the period of time?
CASE STUDY: “Industry-level Dynamics of COVID-19 Economic Crisis
and its Implications”
In the current pandemic-related GDP growth slowdown across the world,
which industries or sectors in the Indian economy do you consider to have
most benefited from the Covid-19 crisis and why? Explain and highlight in
detail using the Demand-Supply analysis to substantiate your argument.
Justify your analysis by supporting it with facts-cum-online data and
substantiate your argument by extensively using graphs to highlight your
answer.
[The objective of this case study is to enable you to apply microeconomic
skills to real world economic scenarios. Accordingly, you are required to be
careful while writing your argument. You are required to refer to both the
Mankiw textbook and the online/offline material to substantiate your answer.]
(5 Marks)
Explain in detail the process by which the consumer arrives at an equilibrium
point. Illustrate this process through the concepts of budget line and
indifference curves. Using this framework, explain the income and
substitution effects for an inferior good when its price rises.
how do we find total cost when we have only total benefit data available
Given the following utility function for two goods X and Y
U(X, Y) =
Where 0<α<1
i) Establish the Mashallian demand functions for X and Y [8 Marks]
ii) From (i) above, derive the indirect utility function [3 Marks]
iii) Using the indirect utility function, derive the expenditure function [4 Marks]
iv) Estimate the Hicksian demand function for X and Y by Shephard’s lemma [ 5 Marks]
Using (i) and (iv) above for X, establish the Slutsky equation for good X. [8 Marks
