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If good X is an input into Good Y and good Y is a substitute for good Z, what can we expect to happen to demand, price, quantity of Good Z if there is a decrease in the price of good X?
1) New cars are normal good and people’s incomes increase. Simultaneously, auto manufacturers must pay more for their worker’s health insurance. What is the effect on price and quantity of new cars?
2) The table below gives a supply schedule.
Point | Price (RM) | Quantity Supplied
A 5 10
B 15 30
C 25 50
D 35 90
a. Using the midpoint method, calculate the price elasticity of supply between points A and B; between B and C and between C and D.
b. Why is the elacticity of supply always positive?
c. Why does the elasticity of supply increase in value as more time passers after a price hike?
A two-year-old child is eating peanuts one at a time from a large box. Even though the child doesn’t understand formal economic theory, he knows when to stop eating because he is full. Describe how this child has already mastered marginal analysis.
A senator wants to raise tax revenue and make work-
ers better off. A staff member proposes raising the
payroll tax paid by firms and using part of the extra
revenue to reduce the payroll tax paid by workers.
Would this accomplish the senator’s goal? Explain
Assume that house prices always rose and never fell. When the demand for housing
increases, prices in the housing market rise but not always by very much. For prices to rise
substantially, the supply of housing must be relatively inelastic. That is, if the quantity
supplied increases rapidly whenever house prices rise, price increases will remain small.
Many have suggested government policies to increase the elasticity of supply. What specific
policies might hold prices down when demand increases? Explain.
The profit after tax for Barstead for the year ended 30 September 2009 was $15 million. At 1 October 2008 the company had in issue 36 million equity shares and a $10 million 8% convertible loan note. The loan note will mature in 2010 and will be redeemed at par or converted to equity shares on the basis of 25 shares for each $100 of loan note at the loan-note holders’ option. On 1 January 2009 Barstead made a fully subscribed rights issue of one new share for every four shares held at a price of $2·80 each. The market price of the equity shares of Barstead immediately before the issue was $3·80. The earnings per share (EPS) reported for the year ended 30 September 2008 was 35 cents. Barstead’s income tax rate is 25%. Required: Calculate the (basic) EPS figure for Barstead (including comparatives) and the diluted EPS (comparatives not required) that would be disclosed for the year ended 30 September 2009
With the help of well-lebelled diagrams, compare the long run equilibrium of a firm under a perfectly competitive market structure and a monopoly market structure
Sales (40,000 units @ Br. 25 each) ............ Br. 100,000
Less: Variable Costs.............................. 70,000
Contribution Margin ............................. 30,000
Less: Fixed Costs ................................. 18,000
Net Profit .......................................... 12.000
- The sales needed to earn a profit of 20% on sales
Using indifference curves show the price effect, the substitution effect and income effect for the rise in the price of inferior good.
[10:15 am, 27/01/2022] Siyad: a) The average prices and quantities of six hypothetical items offered by a government agency running a social protection program for a marginalized community are shown in the following table:
2020
2021
Items
Price (Kshs/Kg)
Quantity (Kg,000)
Price (Kshs/Kg)
Quantity (Kg,000)
Maize Flour (A)
10
4
12
5
Vegetables (B)
15
6
18
10
Peas (C)
10
6
10
10
Beans (D)
20
10
22
20
Wheat (E)
30
12
40
18
Millet (F)
40
10
50
12
Tessy, the programs manager has hired you as a consultant to advice if she needs to ask the government for additional budgetary support. Using 2020 as base year, compute Kelly’s and Fisher’s Price index numbers for 2021 and in each case comment on the result
