Reference no: EM131727949

QUESTION

(a) In a certain economy the marginal propensity to save is 0.2 and the autonomous consumption equals 400.

i. Formulate the consumption function.

ii. If the Government's expenditures were to increase by 50% what would be the resultant change in National income.

(b) The demand and supply schedules for carrots in a certain market are given below:

Price per ton (Sh '000')	Quantity demanded per month (Thousands of tons)	Quantity supplied per month (Thousands of tons)
2	110.0	5.0
4	90.0	46.0
8	67.5	100.0
10	62.5	115.0
12	60.0	122.5

Determine the equilibrium quantity and price by graphical method.

(c)  Explain how the concept of elasticity guides decisions in the following situations:

(i) Government's tax policy on household consumption.                                    

(ii) Devaluation policy to encourage exports and discourage imports.                    

Price discrimination by a monopolist. QUESTION

(c) In a certain economy the marginal propensity to save is 0.2 and the autonomous consumption equals 400.

iii. Formulate the consumption function.                                                                             

iv. If the Government's expenditures were to increase by 50% what would be the resultant change in National income.

(d) The demand and supply schedules for carrots in a certain market are given below:

Price per ton (Sh '000')	Quantity demanded per month (Thousands of tons)	Quantity supplied per month (Thousands of tons)
2	110.0	5.0
4	90.0	46.0
8	67.5	100.0
10	62.5	115.0
12	60.0	122.5

Determine the equilibrium quantity and price by graphical method.

(c ) Explain how the concept of elasticity guides decisions in the following situations:

(iii) Government's tax policy on household consumption.

(iv) Devaluation policy to encourage exports and discourage imports.                    

Price discrimination by a monopolist.