MPhil UGBS 651: Economics

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Data Assignment (Submit xxxxxx)

This assignment should be done in groups. The project you will do should equip you about data collection and its issues.And as part of your data collection exercise, each group should collect All banks in Ghana annual reports from 2000 to 2012. If the bank was established recently, collects its report to date.

Attempt at Home: Dont' Submit

Consider a competitive market Demand and Supply functions for the furniture market given as follows: Q=56-2P and Q = -10+P (All final monetary values - prices and incomes – are in GH¢‘000)

ai) Find what price will generate a unit PED

aii) Draw the demand and supply surves

b) What are the P* & Q* for furniture

c) Calculate the consumer and producer surplus and the total surplus (in GH¢‘000)

d) If income tax falls by 6, find the new P* and Q*.

e) Suppose the cost of manufacturing furniture reduce by 36, find the new P* and Q*.

f) If the government enacts a legislation that imposes a price ceiling equivalent to GH¢18, compute the impact of this law.

g) Determine what would happen if the government decides to buy the furniture at a price floor of GH¢25.

i) What's the cost to the government of this price floor

j) Calculate the price elasticity of demand (PED) and price elasticity of supply (PES) at the equilibrium, found in (b) above.

k) Is demand more or less sensitive to price changes? Explain your answer

Assignment 3: Submit on 23rd Sep (not > 1/2 page)

• The demand equation for a product is Q=50-2.25P. Calculate the point-price elasticity of demand if P=2. • According to an FTC Federal by Michael Ward, AT&T’s own price elasticity of demand for long distance services is -8.64. AT&T needs to boost revenues in order to meet it’s marketing goals. To accomplish this goal, should AT&T raise or lower it’s price? If AT&T lowered price by 3 percent, what would happen to the volume of long distance telephone calls routed through AT&T? According to an FTC Report by Michael Ward, AT&T’s cross price elasticity of demand for long distance services is 9.06. If competitors reduced their prices by 4 percent, what would happen to the demand for AT&T services?

Assignment 2 (submit xxxx. Not > 1/2 pag)

A. The Mirror article points out that the price of economics textbooks is up 10 percent this year over last year, and yet the number of textbooks sold is higher this year. This article claims that these figures show that the law of demand does not apply to textbook. Is there a flaw in this argument? (Hint: A textbook is not a giffen good.)

B. Do buyers prefer lower prices to higher prices? Well, what buyer would pay a higher P for anything anyway? But wait a minute! Price ceilings are often lower than P*. Does it follow that buyers prefer price ceilings to equilibrium prices?

Assignment 1 (submitted)

A. Draw the PPF if in the production of building (x-axis) and railway (y-axis) sections there are: diminishing returns

and increasing returns

B. What happens to the output of building sections if the output of rail sections is increased ? Is the effect constant if there are diminishing returns?

Question 2:The following incomplete table shows a firm’s various costs of producing up to 6 units of output. Fill in as much of the table as possible. If you cannot determine the number in a box, explain why it is not possible to do so.

Question 3: The following incomplete table shows a firm’s various costs of producing up to 6 units of output. Fill in as much of the table as possible. If you cannot determine the number in a box, explain why it is not possible to do so.

QUESTIONS ON DEMAND & SUPPLY: Attemp this on your own, don't submit

A rise in the price of air-condition will reduce the quantity demanded of fan. True or False. Draw and Explain

A fall in the disposable income will reduce the demand for shirts. True or False

The demand for pen drive has fallen. This was caused by the rise in the price of CDs. True or False?

1. Explain why a situation of excess demand will result in an increase in the market price. Why will a situation of excess supply result in a decrease in the market price?

2. Using supply and demand curves to illustrate the impact of the following events on the market for coffee:

a) The price of tea goes up by 100 per cent

b) A study is released that links consumption of caffeine to the incidence of cancer.

c) A frost kill half of the Colombian coffee bean crop

d) The price of Styrofoam coffee cups goes up by 300 per cent

3. Suppose we observed that the price of soybeans goes up, while the quantity of soybeans sold goes up as well. Use supply and demand curves to illustrate two possible explanations for this pattern of price and quantity changes.

4. A 10 per cent increase in the price of automobiles reduces the quantity of automobiles demanded by 8 per cent. What is the price elasticity of demand for automobiles?

5. A linear demand curve has the equation Q=50-100P. What is the choke price?

6. Explain why we might expect the price elasticity of demand for speedboats to be more negative than the price elasticity of demand for light bulbs.

7. Many business travellers received reimbursement from their companies when they travel by air, whereas

8. Explain why the price elasticity of demand for an entire product category (such as yogurt) is likely to be less negative than the price elasticity of demand for a typical brand (such as Dannon) within that product category.

9. What does the sign of the cross-price elasticity f demand between two goods tell us about the nature of the relationship between his goods?

10. Explain why a shift in the demand curve identifies the supply curve and not the demand curve.

QUESTIONS ON PRODUCTION & COSTS

1. Suppose a total product function has the “traditional shape”. Sketch the shape of the corresponding labor requirements function (with quantity of output on the horizontal axis and quantity of labor on the vertical axis).

2. What is the difference between average product and marginal product? Can you sketch a total product function such that the average and marginal product functions coincide with each other?

3. What is the difference between diminishing total returns to an input and diminishing marginal returns to an input? Can a total product function exhibit diminishing marginal returns but not diminishing total returns?

QUESTIONS ON PRODUCTION & COSTS

1. What is the relationship between the solution to the firm’s long-run cost-minimization problem and the longrun total cost curve?

2. Explain why an increase in the price of an input typically causes an increase in the long-run total cost of producing any particular level of output.

3. If the price of labor increases by 20 percent, but all other input prices remain the same, would the long-run total cost at a particular output level go up by more than 20 percent, less than 20 percent, or exactly 20 percent? If the prices of all inputs went up by 20 percent, would long-run total cost go up by more than 20 percent, less than 20 percent, or exactly 20 percent?

4. How would an increase in the price of labor shift the long-run average cost curve?

5. a) If the average cost curve is increasing, must the marginal cost curve lie above the average cost curve? Why or why not?

b) If the marginal cost curve is increasing, must the marginal cost curve lie above the average cost curve? Why or why not?

6. Sketch the long-run marginal cost curve for the “flat-bottomed” long-run average cost curve.

7. Could the output elasticity of total cost ever be negative?

8. Explain why the short-run marginal cost curve must intersect the average variable cost curve at the minimum point of the average variable cost curve.

9. Suppose the graph of the average variable cost curve is flat. What shape would the short-run marginal cost curve be? What shape would the short-run average cost curve be?

10. Suppose that the minimum level of short-run average cost was the same for every possible plant size. What would that tell you about the shapes of the long-run average and long-run marginal cost curves?

11. What is the difference between economies of scope and economies of scale? Is it possible for a two product firm to enjoy economies of scope but not economies of scale? Is it possible for a firm to have economies of scale but not economies of scope?

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