Homework Answers

Consider the market for Relaxo floaters where the demand curve is given by Q ^ d = 200 - 2P and Q^ prime =250+30P^ prime -10 P^ m . where Q ^ d is the quantity demanded, Q ^ 1 is quantity supplied. P ist the price of Relaxo floaters.

i. What is the maximum price at which the consumers are willing to purchase the floaters?

Calculate the price elasticity of demand and supply at equilibrium.

11. If now a unit tax is imposed on floaters, which side (demand or supply) will bear a higher

burden of the tax? Why?

Show that the demand side is more elastic than supply as long the price is above 50.

For a downward sloping demand curve, the magnitude of substitution effect is always larger than a that of income effect

For a downward sloping demand curve, the magnitude of substitution effect is always larger than a that of income effect

An individual “Disburse Cash” event is typically linked to (check all that apply):

A. One specific “Issue Debt” event

B. Multiple “Issue Debt” events

C. Multiple “Issue Stock” events

D. One specific “Issue Stock” event

The M:N relationship between the Request Inventory and the Order Inventory events has a minimum cardinality of 0 in both directions because

A. every request must be linked to at least one order.

B. Some requests are denied and thus are never linked to an order.

C. Some orders may be linked to more than one request.

D. all orders must be linked to at least one request.

Which of the following statements are true?

A. Relationships between resources and agents can be modeled to depict accountability and responsibility.

B. Relationships between two resources can be modeled to depict location information.

C. Relationships between two agents can be modeled to show supervisory relations.

D. All of these are correct.

Notes:

1.           The fund owned 12,000 shares in Moyalematt, which were initially purchased for Shs.14, 000. These have been disposed of during the year. The only entries made in the books were in a debtor account and investment account since the shares are yet to be paid for.

2.           The trustees felt the need to reflect the following market prices in the financial statements:

        Loan stock in KVM – Market price index – 84.00

         Shares in Flamingo Airways    -Sh.9.75 per share.

Required:

i)       Statement of change in net assets for the year to 31 October 2001.          (10 marks)

ii)     Statement of net assets as at 31 October 2001.                                             (10 marks)

    (Total: 20marks)

a)     Three year bonds are issued at face value of Sh100, 000 on Jan. 1, 2007, and a stated interest rate of 8%. Calculate the issue price of the bonds assuming a market interest rate of 6 %.( 5 marks)