Macro and micro economics - Assignment Example

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For example when the shirts produced are 90 the amount of computer forgone are less in China than in America, hence low opportunity cost. This means if there is trade China will benefit more, this is because it will import computers and export shirts…
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Macro and micro economics
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Macro and micro economics of the Question One a) b) Chinese. For example when the shirts produced are 90 the amount of computer forgone are less in China than in America, hence low opportunity cost. This means if there is trade China will benefit more, this is because it will import computers and export shirts since the opportunity cost for computers is low.
c) Letting the price of shirts be x and that of computers be y. The two countries might trade if the price of computers is:
d) There will be less trade between the two countries. The economic well-being of the citizens of the two countries improves since both can acquire the commodities locally.
Question Two
Brazil Peru
Soya beans Coffee Soya beans Coffee
20min 60min 50min 75min
a) The worker in Brazil. This is because they can produce one ounce of coffee in loess time as compared to the worker in Peru and also produce soya beans at a higher rate.
b) The worker in Brazil. This is because they can produce the same amount of coffee as the worker in Peru but at a faster rate or within few minutes.
c) Peru will import coffee. Brazil will specialize in producing coffee and hence export to Peru. Peru will specialize in production of soya beans.
d) After the country specialize in producing and exporting those commodities which they can produce at a relatively lower cost and import those goods which are relatively expensive to produce.
Question Three
At equilibrium: QD = QS
1600 – 300P = 1400 + 700P
1600 – 1400 = 700P + 300P
200 = 1000P
Ǭ = 1600 – 300 (0.2)
= 1600 – 60
= 1540
Question Four
Tickets = 39000 = Seating
Let the price of each seat be P.
Tax = $5 per ticket.
The amount for all the seats
Q = 39000P
After tax P1 = P + t
P1 = (P + 0.5)
Q = 3900 + 1950
= 5850
The tax burden falls team owners. This is because the amount of tax levied on each ticket buyer is the same as the one on the Boston fun sends for each ticket.
Question Five
a) Price for cones Pt = P+ 0.5
T = 0.5 + 0.5Q.
b) $o.5
Question Six
a) Consumer surplus =
= 5/2Q
Producer surplus =
= 3/2Q
Total =
= 453.6
b) Producer surplus to Vincent

Consumer surplus to Jules
c) Producer Surplus to Vincent

Consumer surplus to Jules

Question Seven
4P – 80 = 100 – 2P
6P = 180
P = 30
Q = 100 – (2×30)
= 40
Hence P = 30 and Q = 40
b) Consumer surplus =

Producer surplus =
Total surplus = Consumer surplus + Producer surplus
= 400 + 200
= 600
c) The buyer
Question Eight
a) At equilibrium Qd = Qs
300 – P = 2P
300 = 3P
P = 100
Q = 2(100)
= 200
b) Substitute in Qd/Qs
Q = 300 – 100 – 2t/3
= 200 – 2t/3
The price paid by buyer’s increases by 2t/3. The price received by sellers reduces by 2t/3. Quantity sold reduces by 2t/3
Let T represent tax revenue function; 7 – tQ
T = t(200 - 2t/3 )
= 200t - 2t/32
First order condition f(x) gives dT/dt = 0
dT/dt =
200 = 4/3t
T = 150
P =
= 100 + 100 = 200
Q =
= 200 – 100 = 100
Price received by sellers
Pt = P – t
= 200 – 150
= 50
Price paid by buyers = equilibrium price = 200
Quantity sold = Quantity equilibrium = 100
c) The Graph
Tax revenue; T =t.Q.
= 150 × 100
= 15000.
Qd = 300 – P
Qs = 2P After tax Qs = 2P - 300
d)The Graph
The deadweight loss of a tax = (CS = PS) before tax and – (C.S = P.S) after tax
Consumer surplus before tax =
Producer surplus before tax =
Consumer surplus after tax =
Producer surplus after tax =
DWL = (20000 + 10000) – (5000 = 2500)
= 30000 – 7500
= 22500
e) T = 200; a better tax rate T = 180
Question Nine
a) Nominal GDP for year 1 = P1Q1
Nominal GDP for year 2 = P2 × Q2 = P2 Q2
Nominal GDP for year 3 = P3 × Q3 = P3 Q3
b) Real GDP = Current quantities × Price of base year
Real GDP for year 1 = P1Q1
Real DGP for year 2 = Q2 × P1 = P1Q2
Real GDP for year 3 = Q3 × P1 = P1Q3
c) GDP deflator =
For year =
For year 2 =
For year 3 =
d) % growth rate =
Question Ten
a) % change in real GDP =
% change in the price level =
% change in real GDP per year =
% change in the price level per year =
b) % change in real GDP =
% change in price level =
% change in price level per year =
c) % change in real GDP =
% change in real GDP per year =

Elwes, R. O. (2010). Maths 1001. London: Quercus. Read More
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