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a. Suppose a consumer currently has $1000 with which to buy food for this year (c1) and for next year (c2). In both periods, the price of a unit of food is $1. In addition, they can earn 5% interest on their savings; thus for each $1 saved this year, they would receive $1.05 next year. Draw the consumer’s budget set for pairs of c1 and c2. Assuming the consumer has “standard” preferences defined over c1 and c2, depict a typical consumer’s equilibrium and discuss how this explains savings behavior.
b. Suppose that, in addition to the $1000 the consumer has today, they will receive an additional $1000 next year. It is possible to borrow against future income, providing one repays the loan plus 5% interest. Draw the consumer’s new budget set for c1 and c2. (Hint: Can the consumer afford to purchase 1000 units of c1 and 1000 units of c2? Also, the budget line has the same slope as in part a.)
c. Using the budget set obtained in part b, depict two cases: one in which an individual would choose to save part of their present income for next year and another in which a (different) individual would choose to borrow against next year’s income.
The High-Rise Building Company uses 400,000 tons of stone per year. The carrying costs are $100/ton. The cost per order is $500.
The demand curve for product X is given by QDx = 220 ? PX + 3PY + 0.001I where PY is the price of a related good Y, and I is income. The supply curve for good X is given by QSX =10+3PX. What is the marginal effect of an increase in PY on the equilib..
Consider the following production function f(k,l) = k^1/3 + l^1/3. Suppose the government taxes labor at by an amount t per unit of labor. Rewrite the long run cost function including the tax.
q1. suppose the supply of apartments in minneapolis is perfectly elastic. the effect of a 100 per month tax on all
Provide examples of different tools businesses use to identify the elasticity of their different customers. Also elucidate how the financial aid department determines student elasticity.
q.you are the manager of a manufacturer that sells protective cases for the samsung galaxy. samsung produces half of
Countries with higher personal saving rates tend also to have higher rates of business investment and capital accumulation. Explain why this fact does not provide a justification based on social efficiency for policies that increase U.S. personal sav..
If the prevailing marketplace price is $17 every unit, Elucidate how many units will be produced also sold. Illustrate what are profits every unit.
Suppose that in the 1990's, the average retail price of a roll of Kodak film was $6.95 and that Kodak's marginal cost was $3.475 per roll. Based on this information, discuss industry concentration.
If total mortality among children remains constant whereas the incidence of that mortality shifted from late childhood to untimely rates of fertility declined.
after the fourth you wince, "No more, the after-taste is getting to me. I need water." What economic principle does this scenario illustrate? Define the principle.
Firms A and B make up a cartel that monopolizes the market for a scarce natural resource. The firms’ marginal costs are MCa = 6+2Qa and MCb = 18+Qb respectively. The firms seek to maximize the cartel’s total profit. The firms have decided to limit th..
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