Economics Answers

1. Maria can read 15 pages of economics in an hour. She can also read 40 pages of sociology in an hour. She spends 8 hours per day studying.

a. Draw Maria’s production possibilities frontier for reading economics and sociology.

b. What is Maria’s opportunity cost of reading 80 pages of sociology?

What are some of the effects if government does not involve in the circular flow of income model

A market consists of two individuals . Their demand equations are:

P= 4 - 0.25Q₁ and P = 10 - 0.5Q₂

a) What is the market demand equation?

b) At a price of $2, what is the point price elasticity for each person and for the market?

1) When the demand function is 2Q - 24 + 3P = 0, calculate the price elasticity of demand when P = 4 and find the marginal revenue when Q=3.

2) A market consists of three people, A, B , and C, whose individual demand equation are as follows:

A: P= 35 - 0.5Q_A

B: P= 50 - 0.25Q_B

C: P= 40 - 2.00Q_C

The industry supply equation is given by Q_S = 40 + 3.5P

a) Determine the equilibrium price and quantity.

b) Determine the amount that will be purchased by each individual.

Using well illustrated numerical examples from a Zambian set up, kindly discuss two (2) theories that

you have learnt in class, that support the reasons why various countries engage in external trade.

Suppose the market is in equilibrium – which of the following will always result in an increase in the equilibrium price?

Select one:

a.

a decrease in both the supply and demand

b.

a decrease in demand and an increase in supply

c.

a decrease in supply and an increase in demand

d.

an increase in both the supply and demand

Why do we call mechanisms such as proportional income taxes and the welfare system auto-matic stabilizers ? Choose one of these mechanisms and explain carefully how and why it affects fluctuations in output

What is the rationale behind the rationing system for allocation of scarce resources?

You are an analyst employed by a yacht manufacturer that last year sold 30,000 luxury yachts at $500,000 each. Your market research indicates that:

i) the price elasticity of demand for your aircrafts in −0.5. (or +0.5 in absolute value); 

ii) the income elasticity of demand for your aircrafts is +2.6; and 

iii) the cross price elasticity for your aircrafts with respect to the price of a comparable jet manufactured by a competitor is +1.4. 

Answer the following questions based on the information above:

A. Suppose that you expect a ceteris paribus decrease in average incomes of 15% this year compared to last year. How many aircrafts do you estimate that your company will sell this year? How will it impact total revenues? (6 MARKS)

B. Assume now that you do not think incomes will change, but that you expect your competitor will decrease his price by 3%. Assuming that your company does not change the price of its aircrafts, how many would you expect your company will sell this year? (5 MARKS)

Several years ago flooding along with the Missouri and the mississip rivers destroyed thousands of acres of wheat

a) what information would you need about the market for wheat to assess whether farmers as a group were hurt or helped by the floods?