...Business Economics Questions: 1. Explain the subject matter of economics as question concerning the adjustments between unlimited want and limited resources. 1 & 2 2. Explain how Market/Price mechanism solves there central problems of economics 1 & 2 3. Explain why the price in competitive markets settles down the equilibrium intersection of supply and demand. Explain what happens if the market price starts out too high or too low. 3 4.Explain the economic meaning 0f price elasticity of demand with the help of numerical example of your own choice. 4 & 5 5. Discuss the major determinant of price elasticity of Demand 4 & 5 6. Critically Discuss the law of diminishing marginal utility of a numerical example and suitable diagram 5 Price Elasticity of Demand The elasticity of demand (ed) is a measure of the price responsiveness to the quantity demanded and is equal to the percentage change in quantity demanded divided by the percentage change in price. Because the elasticity of demand can vary depending on whether one moves up or down the demand curve, elasticities of demand are often calculated by taking an average the prices and quantities given by the following formula: ed = change in Q / change in P (Q1 + Q2)/2 (P1 + P2)/2 Determinants of price elasticity of demand 1. existence of substitutes—the closer the substitutes for a particular commodity, the greater will be its price elasticity of demand 2. importance of the commodity in the...
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...Poverty Questions 1A) – The number of children living in poverty before housing costs is significantly (about 1.2 million) lower than after housing cost. This is a trend that is kept constant over the decade as the number of children living in poverty before housing costs in 2006 is about 2.8 million and the number after housing costs is 3.8 million, showing that throughout 1996 to 2006 the number of children living in poverty is higher after housing costs. The number of children living in poverty is reduced by 2006, both before and after housing costs as in 1996 the number of children living in poverty before housing costs is 3 million and is reduced to 2.8 million by 2006, whereas the number after housing costs is 4.2 million in 1996 and reduced over the decade. 1B) – Absolute poverty is when an individual or household lives below the poverty line, usually when their income is insufficient for them to afford basic shelter, food, clothing and other necessary commodities needed to live. Relative poverty is when people are poor in comparison to others or compared to the national average. However, relative poverty can vary depending on what it is being compared to, whereas absolute poverty would be the same regardless of the position of others in that society. Absolute poverty shows that individuals may not be able to access basic commodities to suffice their basic needs. Due to various benefit systems being available in the UK, absolute poverty is fairly rare and the data...
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...READ: Naked Economics: Undressing the Dismal Science, Charles Wheeland, W.W. Norton, 2003. Completely- cover to cover. Directions: Create a time management plan for your reading schedule to ensure you have ample time to read the book. Set due dates for each chapter and each part of the assignment. Review your schedule with a parent or guardian. Expectations: Work must be typed, 12 point font, double-spaced. Label each section appropriately with each number. Please check your work for complete sentences and grammatical errors. The answer for each section should be about a half to full page. Due Date: The first day of the semester. No points will be awarded for late work. Be prepared to participate in a class discussion on the first day of school. Questions: 1. Chapter one: In a paragraph, summarize the main points of chapter one. Note that simply listing the bolded statements will get you zero points. There are key ideas and assumptions in this chapter. 2. Chapter two: Explain why incentives matter. What you think about the author’s ideas on black rhino conservation? Explain what perverse incentives are and give examples from a high school student’s life. 3. Chapter three: Summarize this chapter in 1-2 paragraphs. Why might government regulations and lawyers be a good thing? Include specific examples. 4. Chapter four: Summarize this chapter in one paragraph. Include specific examples of government involvement as needed. In another paragraph, be sure to discuss...
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...Q.1 Consider the following Cobb-Douglas production function for your company a. suppose both labor and capital inputs are 20 percent each, determine the approximate change in output LnQ=1.345LnL+1.5LnK ∆LnQ=1.345x20%+1.5x20%=57% b. What type of returns to scale characterizes this production function? How do you know? 1.345+1.5=2.845>1 so it is increasing return of scale c. Based on the production function, determine an expression for the marginal product of labor if 20 units of capital are employed. K=20 Q=L1.345201.5=89L1.345 MPL=∆Q∆L=89×1.345×L0.345=120L0.345 Q.2 Explain the meaning of a ‘long run average cost curve’. When is it downward sloping? (5 lines) A curve that defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of both fixed and variable factors of production. when the curve is declining it indicates economies of scale. Q.3 True or False and why? “If it cost $20 on average to produce 100 units of x and it costs $20.20 on average to produce 101 units of x, then the marginal cost when producing unit #101 is 20 cents” It is wrong. MC=∆TC∆Q TC of 100 units is 20x100=2000 TC of 101 units is 20.2x101=2040.2 MC=2040.2-2000101-100=40.2 Q.4 Having just completed a class in “production and costs”, Rohan, the owner of Zee Industries, decided to pay his workers a wage equal to the value marginal product (w =MPL*P). He found out that his labour employment...
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...Part A Assume that Ray, through his vast industry experience, has perfect knowledge about the costs (and quality) of a computer supplier. Moreover, assume that the computer supplier acts like a price taker in the negotiations. What offer should Ray make to the supplier in order to get the best possible price? Make sure you highlight the intuition for your suggestion. We can assume that in a perfectly competitive market, as Ray has perfect knowledge of costs and quality, his best possible price would be equal to / above marginal cost. Assuming that Ray is a monopoly in the market and there’s an absence of other consumers wiling to pay more, Ray should make a bulk offer with one supplier (assuming there is more than one supplier). This way he will maximise cost savings and profits by quoting above the MC on the decreasing MC curve. insert two figures: one with MC flat, one with MC going diagonally down he would make a bulk order if he knew there was a decreasing MC curve but if MC is flat, he would be impartial to whether or not use 1 or more suppliers Ray has the advantage so will take first, if he didn’t have this perfect knowledge he would take second Practically, if Ray does not have perfect knowledge, but instead has fairly accurate information about the supplier’s costs, what are some of the potential problems that Ray might face? Can these problems be mitigated (and how)? Ensure you explain your answer. Problems Ray may face include misjudging what the MC is...
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...amounts less than sufficient to satisfy all wants or desires. The test for scarcity is price hence only goods that are not scarce command a price.Therefore economists try to explain how this economic problem is solved by different economic systems. There are three economic systems that exist in the world today that is the free market, command and mixed economy. These economic systems have different ways in which they try to answer the fundamental economic questions of “What? How? And for whom to produce for? Samelson and Nordhaus define a market economy as an elaborate mechanism for cording people, activities and business through the a system of price and markets. Production is mainly driven by the market forces of demand and supply, which determine price hence it is termed as the price mechanism. The USA is an example of what can be simply classified as a market economy. Thus by matching sellers and buyers in each market, the three fundamental questions of what? How?, for whom?. Consumers determine what goods and services will be produced by their dollar votes, which means their daily purchasing decisions. Firms in the market economy are profit motivated therefore they abandon areas where they are losing profits and lured by high profits into production of goods in high demand. The question of “How” goods and services are produced is determined by the competition among different producers. Hence the best way for firms to remain competitive in the market economy, is to keeps...
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...Income tax is usually a progressive tax placed upon people who have an income. By being progressive, it means the more a person earns, the more they will have to pay in tax. Income tax is part of fiscal policy and is a major tool used by the government to influence economic performance. In the short run a reduction in income tax would certainly improve economic performance. A reduction in income tax will mean households have more disposable income and so will spend more. This is shown by a shift in aggregate demand from AD1 toAD2. This results in an increase in output and Real GDP of Y1 to Y2 however it also increases the price level from P1 to P2. In the short run this rise in prices is accompanied by a rise in output and real GDP and so is acceptable. However in the Long Run further rises in AD do not cause rises in output and real GDP, instead they only raise the price level This is shown on the above diagram, where the only rise is in the price level which is described by Monetarists as “the greatest economic evil”. As part of the fiscal policy, income tax rates are a demand slide policy, which are used mainly to influence economic growth in the short run. Known as Keynsian approach. Monetarists believe the best way to achieve Long term growth is through supply side policies. These include education and training schemes, corporation taxes and infrastructure. They are all aimed at increasing output and real GDP. As seen above Real GDP and output have increased with no...
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...(a) The three questions that all economies are faced by are what to produce, how to produce and for whom to produce for given a limited amount of resources. The basic economic problem faced by all economies is scarcity of resources. McConnell, Brue simply defines scarcity as the shortage of resources within an economy. In a Planned economy the government answers all the three questions what to produce, how to produce and for whom to produce. what to produce is the first question to b addressed. The government conducts surveys and questioners to find what the consumers want before producing them. The decision on whether to start producing capital or consumer goods rests with the government. The government mass produces because they want to cater for almost everyone and they want the products to be fairly cheap they choose a production method that is least most costly. The last question is for whom to produce. The government desires that everyone gets an equal amount of the products besides social class or any form of discretion. In a Free market economy the questions what to produce, how to produce and for whom to produce maybe answered by individuals who own the land and capital. The market forces, also referred to as the way that the behavior of buyers and sellers affects the levels of prices and wages, without any influence from the government, determine what to produce. the producers a commodity that the consumers are willing to buy the most. In this economy we can...
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...1. Which of the following is NOT an application of supply and demand analysis? a. Understanding changing world economic conditions and their effects on prices. b. Evaluating the effects of government price controls on the agricultural industry. c. Determining how taxes affect consumers’ spending patterns. d. all of the above. e. none of the above. 2. A supply curve reveals a. the quantity of output consumers are willing to purchase at each possible market price. b. the difference between quantity demanded and quantity supplied at each price. c. the maximum level of output an industry can produce, regardless of price. d. the quantity of output that producers are willing to produce and sell at each possible market price. 3. Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect a. the price of steel to fall. b. the demand curve for steel to shift to the right. c. the demand curve for plastic to shift to the left. d. nothing to happen to steel because it is only a substitute for plastic. e. the demand curve for steel to shift to the left. 4. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of...
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...a) Figure 1 shows the UK’s fiscal deficits between 2001/02 and 2013/14. In 2007-8, the UK’s fiscal deficit stood at around 2.3% of GDP however by 2009-10 the UK’s fiscal deficit was 12.4%. A fiscal deficit occurs when government expenditure is higher than revenue received from taxes. One reason for the fiscal deficit was the recession. During the recession many people lost their jobs so the government had to pay out more benefits whilst at the same time they received less tax revenue. The government also needed to spend to get its way out of the economy which again, lead to an increasing deficit. b) Public finances refer to the Public sector revenues and spending. The UK fiscal deficit is set to rise from £90bn in 2008-09 to £175bn in 2009-10. A deterioration in public finances either means a loss of tax revenues or an increase in government spending. One problem occurring due to a deterioration in the public finances for the UK is the increased cost of servicing national debt, which will inevitably increase if a deterioration of finances occurs. The national debt for the UK is expected to rise from around 38% of GDP in 2007-8 to 79% of GDP in 2013-14. A second problem occurring due to a deterioration in public finances for the UK is the need to cut costs. Extract 1 states the increase in public spending can only mean deep cuts in other government departments. Due to this, annual public spending will only be allowed to grow 0.7% in real terms for the five years...
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...Discuss the problems of forecasting future trends in transport markets 15 marks Transport is a derived demand. People and businesses demand transport not for its own sake, but because of the services that it provides. For example, air travel is demanded as people travel abroad for vacation or for business. However, forecasting the demand for transport comes with several difficulties. The nature of the demand for transport makes such forecasting a difficult undertaking. This is partly because the provision of infrastructure may itself influence demand. For example, there has been considerable debate about the effect of road building and improvement schemes. It has been argued that road improvements have the effect of increasing the amount of traffic on the roads, rather than reducing congestion. The fact that much of the transport infrastructure is publicly provided means that such forecasting is an integral part of the process – and it also means that the authorities need a way of taking externalities into account when formulating a transport strategy. There also needs to be careful coordination of transport planning, given the interactions between the demands for different modes of transport. For example, decisions taken now about improvements to the rail network may have implications for the future demand for road transport, and hence for the present need to invest in the road system. Another reason why forecasting...
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...Review question – Chapter 1 Question 1 – what is meant by the term ‘opportunity cost’? what is an example of an opportunity cost of going on holiday? The opportunity of a given action is the value of the next best alternative to that particular action. Opportunity cost of going on holiday, you would have worked at your summer job. Question 2 – what is Karen’s opportunity cost of going to the movie? Karen’s next best alternative is to babysit. By babysitting Karen earns $60 and also gets to keep the $19 that she would have spent going to the movie. Thus her total opportunity cost of going to the movie is $79 Question 3a – what is the definition of a PPC? A PPC is a curve that represents all possible combination of goods that can be produced given the resources that are available. PPC represents the maximum output possibilities for two or more goods, given a set of inputs, and given that those inputs are used efficiently Question 3b – explain how the PPC illustrates the concept of opportunity cost The PPC demonstrates that in order to produce more of one thing, we must produce less of something else. The slope of the PPC tells us the opportunity cost of an extra unit of a good because it tells us how much less of one good can be produced in order for one more unit of the other good can be produced. Question 3c – draw a typical PPC Question 3d – give an example of a change that will cause the PPC to shift out for both goods and an example of a change that will cause...
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...1) For an economy to produce at a point beyond its current production possibility curve, the economy must: A) reduce inputs. B) be more efficient. C) increase inputs. D) waste less. 2) When a decrease in the price of good A causes an increase in demand for good B, the goods are: A) inferior. B) normal. C) complements. D) substitutes. 3) Which of the following might shift the demand curve for butter to the right? A) An increase in the price of bread, a complement B) An increase in income C) A decrease in the price of margarine, a substitute D) A decrease in the price of butter 4) A good harvest will cause: A) a movement up along the supply curve of wheat. B) a movement down along the supply curve of wheat. C) a rightward shift in the supply curve of wheat. D) a leftward shift in the supply curve of wheat. 5) If total expenditure remains constant after price is increased, demand is: A) inelastic. B) perfectly elastic. C) unitarily elastic. D) perfectly inelastic. 6) The short run, as microeconomists use the phrase, is characterised by: A) a period where the law of diminishing returns does not hold. B) no variable inputs - that is all of the factors of production are fixed. C) all inputs being variable. D) at least one fixed factor of production and firms neither leaving nor entering the industry. 7) Philippa grows lettuces to sell. This is a perfectly competitive business and Philippa faces...
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...page 2 Question 1 ……………………………….………………….………………………… page Question 2 ……………………………….………………….………………………… page Question 3 ……………………………….………………….………………………… page Conclusion………………………………………………………………………....... page References………………………………………………………………………....... page Homework assignment#1 Hello my name is Michael Sterner and I am writing a essay to day to answer some questions on a few topics about our economy. The purpose of this paper is to answer 3 questions about (1)Which economic system is best suited for handling a crisis of epic proportions (hurricane, flood, blizzard, forest fire, etc.)? Why? (2) Describe and explain why a socialist system might be the best in responding to the needs of people struck by an emergency situation like the earthquake that occurred in Haiti in January 2010? And finally (3) Use the laws of supply and demand to explain why the cost to heat our homes and businesses goes up in the winter time. Be sure to explain your answer fully? Q1: Which economic system is best suited for handling a crisis of epic proportions (hurricane, flood, blizzard, forest fire, etc.)? Why? The Socialism system seems to offer the best resolution for controlling emergency situations. Socialism, in its perfect form, would be the best economic system to assist people because it demonstrates to people how to come together during this time of crisis and assist each other in this time of great need. Socialism is an economic structure...
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...refer to the Preparing Assignments page (a link is also provided in the Evaluation block on the course homepage). ------------------------------------------------- Read the case “Target: From ‘Expect More’ to ‘Pay Less’” on pages 103 to 105 of the textbook and prepare answers to the questions below. Do not answer the questions at the end of the case in the textbook. Question 1 (20 marks) Identify four actors in the microenvironment that have affected Target’s performance over the past few years. Question 2 (10 marks) Describe how economic and cultural factors affected Target’s marketing strategy during the economic downturn. Question 3 (10 marks) According to its chief financial officer, Target primarily allocates its money to remodelling existing stores to better accommodate the shifts in inventory. Under such a circumstance, which growth strategies in the product/market expansion grid best describe Target’s strategy? Question 4 (20 marks) Name Michael Porter’s four basic competitive positioning strategies. Which one of these best explains Target’s original positioning of “better stuff for slightly higher prices” in the context of global recession? Explain. Question 5 (20 marks) Define both competitor-centred and customer-centred. Is Target a...
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