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You are a commuter student at a local university. Because of the steep rise in gasoline prices, your parents decide to give you enough additional weekly cash so that you can afford the higher transportation expenses without having to reduce your spending on anything else.
True or False, Explain (using indifference curve analysis): Because of your parents' generosity, your standard of living, i.e., welfare, will be unaffected by the increase in gasoline prices. (HINT: Think of the additional cash from your parents as a "cost-of-living adjustment".)
Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2
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Provide an economic explanation of what you have shown in your diagrams above. Discuss what happens to Iceland's (1) level of economic output, (2) employment, (3) real wage rate,
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The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax. Why is this false?
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