Second Assignment October 26th , 2017 Instruction I. Answer the following questions and your answer should be very clear, to the point, and don’t write above or below the lines what is stated in each question. II. Don’t use pencil, and should be submitted in hard copy. III. The final date of submission is November 2nd, 2017. 1. A. What is the difference between elasticity of demand and elasticity of supply? Given the following supply schedule answer the following questions. Price in $ 0 2 4 6 8 10 12 14 16 Quantity Total Revenue %change %change Elasticity in price Quantity 800 700 600 500 400 300 200 100 0 B. Given the following variables fill the blank spaces (column) of the table? C. Explain the relationship between price, total revenue, and elasticity of supply, and what does it show? Your answer should be between 5 to 7 lines D. What does the trend indicate, and what is the economic interpretation of the result you obtained. Your answer shouldn’t be less than 5 lines 2. A. Collin was using public transport when he was a student at the university with a monthly income of $1500. After his graduation his monthly incomer raised to $5500. Then he started using car (he stopped using public transport), purchases a brand box of chocolate that costs $10,000 per 6 month, and his basic consumption (food) habit also changed slightly, it increased from$1700 to $2000. Campground A. Calculate the elasticity, what does the elasticity reveal (explain the economic interpretation)? Use the formula and show the steps, also explain the economic meaning of the answer in 3-4 lines. B. Goods that are considered as basic necessities tend to have inelastic demand, why, and discuss? Answer shouldn’t be less than three lines 3. A. what is the difference between tax and price floor? Your answer shouldn’t be less than 5-6 lines. Employment insurance (EI) refers to tax on labour. In 2006 EI was comprised of 2.1% contributed by employees (42% of the tax), and 2.9% was contributed by employers (58% of the tax). Conflicting pieces of legislation before parliament would change the legal burden of the tax for a variety of alleged efficiency and equity reason. One group would like to place the entire tax on employees, in order to provide an incentive for employers to create more jobs. An opposing group would like to place the entire tax on employers, in order to help workers. A. Draw the diagram that shows the tax on the workers, and tax on firms. B. who are facing a reduced standard of living and why? Write your answer between 4 to six lines 4. A. If government of Canada decided that the equilibrium price is too high and mandated that price can’t be higher than a maximum allowable price, what type of price control is that, and what is its role (how large are the gainers and losers)? Discuss the concept and your answer shouldn’t be less than 6 lines. B. Discuss the arguments and the debates raised by policy makers, and economists about price control mechanism, and what do you think is the reason for their argument? Please explain your answer in 6-7 lines 5. A. consumer surplus is used to measure the wellbeing of consumers but its not a good measure of welfare, why? Explain your answer using 4-6 lines B. Given the figure below x-axis shows the number of tickets sold in thousands, at the given price. The demand curve differs, the market demand curve appears as a straight line. What is the actual expenditure on ticket, and what is the consumer surplus? Use the formula and show the result 6. . Given the table below. Price Q. Demanded Q. Supplied 500 600 700 800 900 1000 600 500 400 300 200 100 200 300 400 450 550 600 A. Graph the market for single bedroom apartments in Edmonton, draw the diagram and show the initial equilibrium? Draw the dig, .. B. Suppose the apartment owners are required to pay $100 per apartment in a renter’s tax to the city government. Use supply and demand analysis to determine the incidence of the tax. Show how the fig changes when government imposed tax, and also explain the incidences of tax in four to five lines. C. If the tax imposed by the government on the renters of the apartment, explain (show) how this affects the initial equilibrium, label the new equilibrium, and explain its implication? Illustrate your answer in 4-5 lines 7. The table below shows the cost of basketball of each seller. Based on this answer the following questions? No Seller Cost 1 Hellen 1500 2 Ravie 1200 3 Ana 900 4 Alex 600 5 John 300 A. What is producer surplus, and draw the supply curve? Draw the fig and give your answer in 4-5 lines. B. Show (point on the supply curve) at producer surplus at each producer price? C. Explain how price affects producers’ surplus? Don’t answer in less than 3 lines please D. Considering the concept of consumer surplus and producer surplus when do we say the allocation of resources determined by free market is desirable? Your answer should be in 5-6 lines and you may also draw the dig. 8. A. When learning about consumer and producer surplus we have discussed the contrasts between efficiency and equity often policy makers find it difficult to address, why? Discussed and your answer shouldn’t be less than 15o words. B. Also explain how following “ laissez fair” policy can overcome market complications? Your answer shouldn’t be less than 170 words. 9. How could a good that is branded and expensive (like computer), and is on sale be an inferior and a normal good? Your answer shouldn’t be less than four lines. 10. What is the difference between income elasticity and cross elasticity, and what is the economic meaning of each? Your answer should not be less than 8 lines.
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