The essay "Macro and Microeconomics Issues" focuses on reduction in production of oranges and proposal for the increase in ethanol production, frictional unemployment, the devastating impact of hyperinflation on economies, and fixed and flexible exchange rates…
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The analysis of price and income effects based on the estimated demand system has suggested that with the increase in food price inflation, the demand for staple food (rice, wheat, and sugar) may not be affected adversely but, that of high-value food commodities is likely to be affected negatively.” The increase in the price of orange due to supply constraints would lead to increase in prices of other fruits in general.
Poor people tend to spend more on bread, a staple food item in spite of price increase by reducing their consumption of other food which cost more. This phenomenon is called as ‘Giffen’s Paradox’. Giffen’s paradox is not applicable in the case of orange, as it is not a staple food in poor households. Demand for the orange cannot be considered inelastic. Silberberg and Walker(687) observe “When the price of the Giffen good changes, therefore, not only does the income term outweigh the substitution term for the Giffen good, but a similar result is produced for the cross effect on the other commodity.” Therefore, increase in the price of orange will lead to increase in the price of other fruits like grapes or apples due to the substitution effect.
The increase in price or orange induces farmers to increase the area under crop for oranges which are expected to increase the production of oranges to the normal level of demand in the economy. However, when the farmers have other alternatives of producing corn or other grasses, may be at a lesser cost of production for manufacture of ethanol, the scenario with regard to supply pattern changes drastically. President George W. Bush called for the United States to reduce its gasoline consumption by 20% in the next decade. Considering the growth rates in consumption of gasoline, reduction in consumption of gasoline is very difficult. He proposed an increase in ethanol produced from corn and the stalks and leaves from corn and other grasses.
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(“Macro and Microeconomics Issues Essay Example | Topics and Well Written Essays - 2500 words - 2”, n.d.)
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(Macro and Microeconomics Issues Essay Example | Topics and Well Written Essays - 2500 Words - 2)
“Macro and Microeconomics Issues Essay Example | Topics and Well Written Essays - 2500 Words - 2”, n.d. https://studentshare.org/macro-microeconomics/1617401-course-project.
Hence according to the given study the price elasticity of demand for petrol in the short run as well as in the long run is inelastic because their PED lie between zero and one. 1b. The short run PED is smaller or relatively inelastic than the long run PED because it is often easier to switch between products in the long run than in the short run (Perloff 2003).
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Therefore, if the price of the shirt is 220 francs, the price of the shirt in dollars is calculated as follows. 1 dollar = 5.5 francs Dollar price of shirt = 220 francs Using the principle of cross-multiplication, Price of shirt in dollars = (220 francs x 1dollar)/5.5 francs = 40 dollars Question two Supposing that a Frenchman wants to import a new Chrysler Neon costing 14,300 dollars and the prevailing exchange rate is 5.5 francs/dollar, the franc price of the car can be determined.
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