Answer to Question #45930 in Macroeconomics for Coleine

Question

1) Suppose the Jamaica biscuit producing company, located
in Kingston, has 100 ovens and the life of each oven is 5
years, and 20 ovens must be replaced each year.
a. If demand for the biscuits is constant, how many
ovens will be replaced each year?
b. If the demand for biscuits rises by 10% in the 6th
year, how many ovens will be replaced in that year?
c. If the demand for biscuits remains constant at the
new level, how many ovens will have to be replaced
each year?
d. If the rate of increase in consumer goods is not
maintained what happens to the capital goods?


2) The global economic downturn since 2008 has affected
the Jamaican economy and the general question from the
Jamaican people is that when will the economy recover
from the recession. To find an answer to the state of the
economy’s health, a television reporter interviews Mr.
Carter, a local car dealer. Mr. Carter said “I do not see

Answer 1

a. If demand for the biscuits is constant, 20 ovens will be replaced each year.
b. If the demand for biscuits rises by 10% in the 6th year, 100*1.1/5 = 22 ovens will be replaced in that year.
c. If the demand for biscuits remains constant at the new level, 22 ovens will have to be replaced each year.
d. If the rate of increase in consumer goods is not maintained, the capital goods will work after the life time is over