Assignment:
QUESTION 1
Determine whether each of the following would increase or decrease the opportunity cost for mothers who choose not to work outside the home. Explain your answer.
a.Higher levels of education for women
Increase the opportunity cost. This is because the foregone option which is a raise in the education levels has gone up and hence the benefits from the foregone opportunity are more.
b.Higher unemployment rates for women
Decrease in the opportunity costs. This is because the foregone opportunity was employment whose value/rate of employment has gone down and hence he won't be losing so much.
c.Higher average pay levels for women
Increase in the opportunity cost. The foregone option in this scenario is employment whose value has gone up since the average pay levels for women have gone up.
d.Lower demand for labour in industries that traditionally employ large numbers of women
Decrease in the opportunity cost. This is because in the scenario, the foregone option is employment. The industries that employed women have a low demand for the women to employ. The choice she chose was to be a stay home mum is more beneficial since the demand for labour is down.
QUESTION 10
Suppose taxes are related to income as follows
Income Taxes
$ 1,000 $ 200
$ 2,000 $ 350
$ 3,000 $ 450
What percentage of income is paid in taxes at each level
$1000 = 200/1000*100
= 20%
$2,000 = 350/2000*100
=35%
$3,000 = 450/3000*100
=15%
a. Is the tax rate progressive, proportional or regressive
Progressive tax rates
b.What is the margin tax rate on the first $1,000 of income?
=20/100*1000
=200
The second $1,000?
= 35/100*1000
=350
The third $1000
= 15/100*1000
= 150
QUESTION 2
For each of the following pair of goods, determine whether the goods are substitutes, compliments or unrelated
a.Peanut butter and jelly - substitute goods
b.Private and public transportation - substitute goods
c.Coke and Pepsi - substitute goods
d.Alarm clocks and automobiles-unrelated goods
e.Golf clubs and golf balls-complementary goods
QUESTION 3
List five things that are held constant along a market demand curve, and identify the change that would shift the demand curve to the right-that is what would increase demand.
Factors that are held constant include:
Ø Income of the consumer
Ø Change in taste and preferences
Ø Season
Ø Future expectations of the market
Ø Prices of related goods
Changes that would shift the demand curve to the right include:
Ø Rise in the income of consumers
Ø Peak season of the product
Ø Fall in price of the complementary product
Ø Rise in price of a substitute
Ø Change in preference and taste and they now prefer the subject product
QUESTION 4
Why is a firm willing and able to increase the quantity supplied as the product price increases?
This is because there is an increase in the profit margin since increased supply means that there is more making of profit. This could be because the production costs of mass goods is lower.
QUESTION 12
Assume the market for corn is depicted as in the table below
a.Complete the table below
b.What market pressure occurs when quantity demanded exceeds quantity supplied? Explain.
Upward pressure. This is because the pressure caused by demand exceeding supply leads to an increase in the price of the product.
c.What market pressure occurs when quantity supplied exceeds quality demanded. Explain
Downward pressure. This is because the supply is more than demanded and hence a reduction in price.
d.What is the equilibrium price?
$ 2.20
e.What could change the equilibrium price?
An increase in the demand of a product exceeding the supply of the product
An increase in supply exceeding the amount that is being supplied.
f.At each price in the first column of the table below, how much is sold?
$1.80 = 200 $ 2.40 = 230
$2.00 = 230 $2.60 = 200
$2.20 = 270 $ 2.80 = 180
|
Price per bushel
($)
|
Quantity demanded
(millions of bushels)
|
Quantity supplied
(millions of bushels)
|
Surplus/
shortage
|
Will price rise or fall
|
|
1.80
|
320
|
200
|
120
|
Rise in price
|
|
2.00
|
300
|
230
|
70
|
Rise in price
|
|
2.20
|
270
|
270
|
0
|
Price remains constant
|
|
2.40
|
230
|
300
|
70
|
Fall in price
|
|
2.60
|
200
|
330
|
130
|
Fall in price
|
|
2.80
|
180
|
350
|
170
|
Fall in price
|