The relationship between consumption spending and income

Anonymous
timer Asked: Feb 7th, 2018
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Question description

solving clearly, all the requirements on the paper I think no need for explanation .





Name . Time & Day . IVC Irvine Valley College 1. Homework – Functions, PP & Comp Ad Economics 2 Mark McNeil Assume that the amount of consumption spending (spending by consumers on goods and services) is related to the level of after-tax income (Inc.), the level of prices in the economy (P), consumer expectations about future economic conditions (Exp.), and the amount of consumer wealth - savings and the value of investments (W). More formally, we can write this as: C = f ( Inc., P, Exp, W) a. The relationship between consumption spending and income is: positive negative (circle one) and would graph as a(n) upward downward (circle one) sloping curve, assuming other things equal. b. The relationship between consumption spending and the price level is: positive negative (circle one) and would graph as a(n) upward downward (circle one) sloping curve, assuming other things equal. c. The relationship between consumption spending and consumer expectations is: positive negative (circle one) and would graph as a(n) upward downward (circle one) sloping curve, assuming other things equal. d. The relationship between consumption spending and consumer wealth is: positive negative (circle one) and would graph as a(n) upward downward (circle one) sloping curve, assuming other things equal. e. In graph A, draw the relationship between consumption spending and after-tax income, ceteris paribus . Show (and clearly label) what happens when income increases. f. In graph B, draw the relationship between consumption spending and consumer wealth. What happens to this relationship when consumer expectations improve (ceteris paribus ). Show this and clearly label it. Consumption A Consumption Income B Wealth Econ 2 2. Intro Homework Page 2 Given the production possibilities curve shown for Country G, show and explain the following: Consumer Goods a. If Country G produces 100 units of consumer goods and 500 units of capital goods, is it being efficient? Explain. 200 100 0 500 1000 Capital Goods b. If Country G produces 100 units of consumer goods, what is the maximum number of units of capital goods can it produce? Show this combination on the diagram and label it "Point A". c. Starting from point A, if Country G wants to increase its production of consumer goods from 100 units to 150 units, what will be the cost of doing so? Show this and label the cost clearly on the diagram. Explain briefly. d. Under what circumstances is it possible for Country G to produce 200 units of consumer goods and 1000 units of capital goods (given the assumptions under which this production possibilities frontier is drawn)? Explain. e. What will happen in the future to the production possibilities frontier of Country G if it allocates its resources so that it produces mostly capital goods (approximately 800 per year)? Explain. Econ 2 3. Intro Homework Page 3 Assume that if country A devotes all its resources to the production of wampum, it can produce 180. If, on the other hand, it devotes all its resources to the production of baskets it can produce 855. Country B can produce 303 wampum or 2727 baskets. Given this information: a. Complete the production possibilities curves for each country. Wampum Country A Wampum Country B Baskets Baskets b. Explain which country should produce each product. i. The cost to Country A of producing a unit of baskets is_________units of wampum forgone. ii. The cost to Country B of producing a unit of baskets is ________units of wampum forgone. iii. The cost to Country A of producing a unit of wampum is________units of baskets forgone. iv. The cost to Country B of producing a unit of wampum is _______units of baskets forgone. c. Therefore, Country A is the low cost producer of ________________because: and Country B is the low cost producer of __________________because: d. A trading ratio that both countries will find beneficial is: _______ basket(s) for 1 unit(s) of wampum. Econ 2 4. Intro Homework Page 4 Explain whether each of the following is a positive or a normative statement, and briefly explain why. a. The Mercedes SLS is the coolest car on the road. b. The Mercedes SLS is the fastest car on the road.

Tutor Answer

george
School: Boston College

Hi buddy, here are the solutions. Let me know in case you have any question. Regards.

Name
Instructor
Course
Date
ECONOMICS QUESTIONS SOLUTIONS
SOLUTION TO QUESTION 1
a. The relationship between consumption spending and income is positive and would graph
as upward sloping curve.
b. Relationship between consumption spending and price level is negative and graphs as
downward sloping curve.
c. The relationship between consumption spending and consumer expectations is negative
and would graph downward sloping curve.
d. The relationship between consumption spending and consumer wealth is positive and
would graph as upward sloping curve.
e. Graph A, showing the relationship between consumption spending and after-tax income,
ceteris paribus. When increased, co...

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Review

Anonymous
Awesome! Exactly what I wanted.

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