Microeconomics Answers

5. Explain the problem of double counting in national income measurement. Discuss with the help of a numerical example how it can be tackled by the value added method.

4. What are the major objectives of macroeconomics? Write a brief definition of each of these objectives. Explain carefully why each objective is important.

3. Define the following carefully and give an example of each: (a) Consumption, (b) Gross private domestic investment, (c) Government consumption and investment purchases (in GDP), (d) Government transfer payment (not in GDP), and (e) Exports.

2. Consider the following data: Nominal GDP for 1993 was $6553 billion, as compared to $6244 for 1992. The GDP deflator for 1993 was 102.6, as compared to 100.0 for 1992. Calculate real GDP for 1992 and 1993, in 1992 prices. Calculate rates of growth of nominal GDP and real GDP for 1993. What was the rate of inflation (as measured by GDP deflator) for 1993?

1. You sometimes hear, “You can’t add apples and oranges.” Show that we can and do add apples and oranges in the national accounts. Explain how.

when the price of a jar of jelly decreased from $4 to $2, suppliers of jelly decreased production from 250,000 jars to 150,000 jars. What is the price elasticity of supply in this case? What is the interpretation of the estimated elasticity?

when the price of product A decreased from $2 to $1, the consumer bought 28 units of product B instead of 20. What is the consumer's cross-price elasticity of demand for these two products? What does the calculated elasticity imply about the relationship between product A and product B for this consumer?

when a flower shop raised the price of a floral arrangement from $20 to $28, the number of the arrangements sold decreased from 30 Units a week to 20 Units a week. What is the price elasticity of demand for the flowers in this case? How did the shop's total revenue change as a result of this?

c. Jimmy’s landlady complains about all the visitors coming into the building and tells Jimmy to stop selling peeps; Jimmy finds out, though, that if he gives her $0.20 per peep she’ll stop complaining. What effect does this bribe have on Jimmy’s marginal cost per peep? What is the new profit-maximizing quantity of peeps? What impact does this bribe have on Jimmy’s total profit? Price of Peep 1.20, 1.00 ,0.90, 0.80 ,0.70 ,0.60, 0.50, 0.40, 0.30, 0.20, 0.10 Quantity Demanded 0 100 150 200 250 300 350 400 450 500 550

How monopoly markets end with Introduction of competition ?