Assume a two-sector economy model is given by: Y = C + I, C = 97 + 0.7Y, I = 180 – 125i Ms = 255, L1 = 0.2Y, L2 = 220 – 175i where Y is income, C is consumption, I is investment, i is rate of interest, Ms is money supply, L1 is transactionary demand for money and L2 is speculative demand for money.Find the equilibrium income level and interest rate, together with equilibrium levels of C, I, L1 and L2.Show what happens to the equilibrium conditions if autonomous investment falls from 180 to 110.Demonstrate your answers to (a) and (b) graphically.Assume that the demand function for a commodity is given by Qd = 3 – 0.1P and that the supply function is given by Qs = 1 + 0.05P, where P is the price, Qd is the quantity demanded and Qs is the quantity supplied. Suppose the government levies a tax of t cedis per unit sold. If the market is in equilibrium and the tax is increased, show how the price, quantity and tax revenue will change once the new equilibrium has been attained.An estate agent advertises its houses in two media; Daily Graphic and Ghanaian Times. The agent believes that there is a relationship between the sales S and the amounts spent on the two advertising media. The relationship is given by; where, d is the amount spent in Daily Graphic and g is the amount spent in Ghanaian Times. The estate’s agent fee is 12½% and this includes the cost of adverting. If the agent has planned to spend only 200 thousand Ghana Cedis on advertisement, show how it should be allocated between the two media in order to maximize net profit.A manufacturer of shirts has the following production function where Q is the number of shirts manufactured per day, t days from the beginning of a production run.Find the number of shirts that will be produced during the first 5 days of production.How many days will it take to produce200 shirts?How many days will it take before the manufacturing rate is at least 48 per day?a) Find the stability conditions for a two-sector income determination model in which are derivatives of consumption, investment, and income, respectively, from their equilibrium values . That is , etc. and income changes at a rate proportional to excess demand (C + I – Y), andb) Assume that; that is price is no longer determined by a market-clearing mechanism but by the level of inventory .Find the price Pt for any periodComment on the stability conditions of the time path.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume a two-sector economy model is given by:

Y = C + I, C = 97 + 0.7Y, I = 180 – 125i M_s = 255, L₁ = 0.2Y,

L₂ = 220 – 175i

where Y is income, C is consumption, I is investment, i is rate of interest, M_s is money supply, L₁ is transactionary demand for money and L₂ is speculative demand for money.

Find the equilibrium income level and interest rate, together with equilibrium levels of C, I, L₁ and L₂.
Show what happens to the equilibrium conditions if autonomous investment falls from 180 to 110.
Demonstrate your answers to (a) and (b) graphically.
Assume that the demand function for a commodity is given by Q_d = 3 – 0.1P and that the supply function is given by Q_s = 1 + 0.05P, where P is the price, Q_d is the quantity demanded and Q_s is the quantity supplied. Suppose the government levies a tax of t cedis per unit sold. If the market is in equilibrium and the tax is increased, show how the price, quantity and tax revenue will change once the new equilibrium has been attained.
An estate agent advertises its houses in two media; Daily Graphic and Ghanaian Times. The agent believes that there is a relationship between the sales S and the amounts spent on the two advertising media. The relationship is given by;

where, d is the amount spent in Daily Graphic and g is the amount spent in Ghanaian Times. The estate’s agent fee is 12½% and this includes the cost of adverting. If the agent has planned to spend only 200 thousand Ghana Cedis on advertisement, show how it should be allocated between the two media in order to maximize net profit.

A manufacturer of shirts has the following production function

where Q is the number of shirts manufactured per day, t days from the beginning of a production run.

Find the number of shirts that will be produced during the first 5 days of production.
How many days will it take to produce200 shirts?
How many days will it take before the manufacturing rate is at least 48 per day?
a) Find the stability conditions for a two-sector income determination model in which are derivatives of consumption, investment, and income, respectively, from their equilibrium values . That is , etc. and income changes at a rate proportional to excess demand (C + I – Y), and
b) Assume that;

that is price is no longer determined by a market-clearing mechanism but by the level of inventory .

Find the price Pt for any period
Comment on the stability conditions of the time path.

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