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Assume that books were sold in a perfectly competitive market. In response to consumer complaints about the high price of books, the government imposes a binding (effective) price ceiling.
a. In order to be effective, where must the price ceiling be set?
b. Using standard demand and supply analysis, graphically illustrate the impact of the price ceiling on the number of books purchased.
c. Identify the change in consumer surplus from the price ceiling. (Ignore the possibility of a black market.)
d. Will the price ceiling cause consumer expenditure on books to increase or decrease? Explain
Assume that the inverse demand function for a two period depletable resource is P =24 – 0.2q and the constant marginal cost of supplying it is $6 (a = 24, b = 0.2, c = 6). If 60 units are to be allocated between two periods, how much would be allocat..
With an interest rate of 10 percent this person uses $100 current income along with an $80 bank loan to finance $60 of education. Explain how this individual should respond if interest rate increases. Discuss income and substitution effects.
A consumer has a budget of $250 to spend on electricity and food. The price of food is $1. Initially, the price of electricity is 10¢/KwH (kilowatt hour). However, in order to discourage excessive use of electricity and promote conservation, the Publ..
In which of the three market arenas is each of the following goods traded?
What would happen if no one tried to manage the business cycle? What role do you see for the executive branch of the US government managing the business cycle? How does fiscal policy work? What are its limitations?
The makers of academic books find that when they raise the price of the average book from $60 to $95, quantity demanded among students drops from 100 to 85. Among casual readers, quantity demanded drops from 80 to 35. Calculate the price elasticity o..
Suppose that there is a temporary, but significant, increase in oil prices in an economy with an upward-sloping SRAS curve. If policymakers wish to prevent the equilibrium price level from changing in response to the oil price increase, should they i..
In the early 1980s, Michael Milken developed the low-grade bond (or junk bond) for corporate finance. Throughout the 1980s, these were used by firms to finance leveraged buyouts (purchasing a controlling interest in a company’s shares using money rai..
Discuss how discrimination affects efficiency within organisations, with special emphasis on LGBT issues. Also discuss why we might observe discrimination, given the efficiency implications highlighted in the literature.
Explain how changes in prices result in a downwards sloping demand. Explain how changes in prices result in an upward sloping supply. What will happen when consumer demand equals producer supply?
Explain how an open market sale of Treasury securities by the Fed affects the following:
Assume the marginal propensity to consume for U.S. households equals .9, and the marginal propensity to import for the united states equals .1. Suppose an increase in investment of $10 million occurs at each level of income. What does the value of th..
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