Economics Answers

Consider the demand for a good. At price Rs 4, the demand for the good is 25 units.

Suppose price of the good increases to Rs 5, and as a result, the demand for the good

falls to 20 units. Calculate the price elasticity?

Three threats that unions experience as a result of globalisation

The Teenager Company makes and sells skateboards at an average price of $70 each. During the past year, they sold 4,000 of these skateboards. The company believes that the price elasticity for this product is about −2.5. If it decreases the price to $63, what should be the quantity sold? Will revenue increase? Why

Suppose the absolute values of the intercept and slope of the demand function

are approximated to be ten (10) and three (3) respectively. If the absolute

values of the intercept and slope of the supply function are assessed to be six (6),

and five (5) respectively, calculate equilibrium price and quantity (4 Marks)

- Suppose the intercept of the demand function increases by two (2), while the

slope remains the same. If the supply function remains the same, estimate the

new equilibrium price and quantity (4 Marks)

- Demonstrate graphically, the effect of the increase in the intercept of the

demand function in (b) above on the equilibrium quantity and price. What

generalization can you come up with from the resulting graphical analysis?

(7 Marks)

A firm’s short-run marginal product of labour function is 3 22 5. 2 MP   L  L  Use indefinite integrals to solve for the total product function.What increase in the total product will be brought about by employing two additional units of labour if five units are currently hired?

(Ignore income taxes in this problem.) Allen Company's required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $40,000 and will have an 8-year useful life with zero salvage value. Straight-line depreciation will be used.

Explain at least 3 points the meaning of cost of capital and its relevance in a net present value (NPV) analysis.

(Ignore income taxes in this problem.) Allen Company's required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $40,000 and will have an 8-year useful life with zero salvage value.

Required:

i) Discuss the implications for project investment priority based on your answer in (i) and (ii).

(Ignore income taxes in this problem.) Allen Company's required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $40,000 and will have an 8-year useful life with zero salvage value.

Required:

i)     The company would like to use NPV to evaluate the project now. Compute the machine's NPV, assuming cost of capital is 10%. Would you recommend purchase of the machine? Explain.

(Ignore income taxes in this problem.) Allen Company's required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $40,000 and will have an 8-year useful life with zero salvage value.

Required:

i） Compute the machine's internal rate of return to the nearest whole percent. Would you recommend purchase of the machine? Explain.

(Ignore income taxes in this problem.) Allen Company's required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $40,000 and will have an 8-year useful life with zero salvage value.

Required:

i） Compute the machine's internal rate of return to the nearest whole percent. Would you recommend purchase of the machine? Explain.

ii)     The company would like to use NPV to evaluate the project now. Compute the machine's NPV, assuming cost of capital is 10%. Would you recommend purchase of the machine? Explain.

iii) Discuss the implications for project investment priority based on your answer in (i) and (ii).