Consider the diagram below which depicts a two-household community consisting of hOusehold A and household B. The quantity of public good is measured along the horizontal axis and the share of tax paid by HHA and HHB measures the share of tax paid by HHẠ and HHB.

Consider the diagram below which depicts a two-household community consisting of hOusehold A and household B. The quantity of public good is measured along the horizontal axis and the share of tax paid by HHA and HHB measures the share of tax paid by HHẠ and HHB.

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 that the economy is characterized by the following behavioral equations: C = 200 +(0.5)YD, where YD = Y-T I = 150 + 0.25Y - 1000 i T = 200; G = 250 Money supply (M/p)s = 1600 Money demand (M/p)D = 2Y – 8000 i C is private consumption, Y income, T taxes, I business investment, G government spending, i the interest rate. (1) Find the equation for aggregate demand (Z) (2) Derive the IS equation (Hint: Express the equation with Y on the left side and others on the right side) (3) Derive the LM equation (Express the equation with i on the left side and everything else on the right side) (4) Find equilibrium real output (Hint: plug the expression for the interest rate given by the LM equation in (3) into the IS equation in (2), and then solve for Y) (5) Find the equilibrium interest rate (Hint: plug your answer in (4) into the LM equation in (3))
Q.4. Example 1.D.1: Suppose that X = {x,y,z}, B = {{x,y}, {y,z},{x,z}}, C({x,y}_ = {x}, C({y,z}) = {y} and C({x,z})={z} This choice structure satisfies the weak axiom. Nevertheless, we cannot have rationalizing preferences. How do we know if this choice structure satisfies the weak axiom? Given the C({x,y}) = x, C({y,z}), shouldn't C({x,z}) = x? if we have to always make the same choice based on WARP.
For example, the economy of a country can be explained by several models as follows: Consumer: The consumer derives his satisfaction from his current consumption, future consumption and his free time (u(C,C',l,l'). He maximizes his utility by: C+wl+11+rC'+w'1+rl'=wh+π-T+w'h+'-T'1+r It is assumed that consumer preferences meet the general conditions that are often used (more is better, preference for diversity, all goods are normal, substitution effect is more dominant). Firm: In the first period, the firm has K capital and employs N workers to produce Y output: Y outputs: Y=zF(K,N) The profit in the first period is =Y-wN-I Where I is the company's investment. Investments increase the capital stock for the second period: K'=1-dK+I In the second period the firm will produce output of Y': Y'=z'F(K',N') Then the profits obtained in the second period are: '=Y'-w'N' Firms choose the demand for labor (N, N') and the demand for investment I to maximize their value: V=π+π'1-r…
Assume the following behavioral equations for a macroeconomy:C = 100 + 0.9Yd, I = 50, T = 100 and G = 40. Calculate the equilibrium level of output.
emperical evidence suggests that consumers tend to spend their current disposable income immediately
Review Appendix 2A of Griffin (on Lagrangian Method). Especially go over Box 2A.1. Using the utility function U = (x^1)(5w^1)(5), income = 40k, p_x = 1, find the demand function for water. (Follow the same steps.).
Betty has the endowment (8 eggs, 20 yogurts), which she can trade on the market. If the price of eggs is $1.8 per egg and the price of yogurts is $2.7 per yogurt, what is the value of her endowment at market prices? Please round your answer to two decimal places, if necessary.
Suppose we wanted to investigate the saving and borrowing behavior of consumers. It’s not that difficult to extend our basic model. We can use the same framework as before, but define our two goods as “consumption in period 1” (horizontal axis) and “consumption in period 2” (vertical axis). a. Construct a budget constraint for a consumer who earns $100 in income in period 1 and $300 of income in period 2. Label this point E for the “Endowment” point. Assume that he can choose to save some income in period 1 to be used in period 2, or to borrow some income from period 2 to use in period 1. (Let’s imagine the consumer saves the money by putting it in a piggy bank and can borrow money from his parents, who don’t charge interest.)
Suppose that you have data at the individual level that includes information on the price of a doctor visit an individual and the number of doctor visits they go to in a given year. For simplicity, let's say that those with more generous plans pay less for a doctor's visit, while those with less generous plans pay more for a visit. You graph the relationship between the price individual pays for doctor visits against the number of visits, and you see a downward sloping line; let's call this "measured demand." The problem of "endogeneity" discussed this week could arise here if individuals who know they go to the doctor frequently buy_ generous coverage while those who know they rarely go to the generous coverage. This would imply that the "measured" demand curve is doctor purchase. more elastic than the "true" demand curve. more; less more; more less; less less; more
Suppose that an environmental amenity, beachfront, increases demand for condos. Demand for condos can be described by the following equations: • Demand for condos in the region without beachfront: Q0 = 200 − 2P • Demand for condos in the region with beachfront: Q1 = 300 − 2P (a) Compute the value of beachfront based on the difference in total willingness to pay if 50 condos are purchased in each region by following these steps: i. Solve for expressions for MW T P for condos in each region. Depict these curves on a graph. ii. Solve for the total willingness to pay for 50 condos with beachfront. Solve for the total willingness to pay for 50 condos without beachfront. Depict this on the graph you drew in (a). iii. Solve for the value of beachfront. Depict this on the graph you drew in (a). (b) Suppose the supply for condos in each region is given by MC = Q and you cannot observed supply and demand directly. That is, you can only observe the market prices and quantities in each region.…
If the government increases taxes by 50, ceteris paribus, identify or solve for the ... IS Relation LM Relation Equilibrium Real Output (Y) Equilibrium Interest Rate (i) Equilibrium Consumption (C) Equilibrium Investment (1) = = = CLICK CLICK CLICK CLICK CLICK CLICK
The town of Wollulung has two residents: Bach (B) and Mozart (M). The town currently funds its free outdoor concert series solely from the individual contributions of these residents. Each of the two residents has a utility function over private goods (X) and total concerts (C), of the form: U = 3 × log(X) + 2× log(C) The total number of concerts given, C, is the sum of the number paid for by each of the two persons: С %3D Св + См Bach and Mozart both have income of 60, and the price of both the private good and a concert is 1. Thus, they are limited to providing between 0 and 60 concerts. a) How many concerts are given if the government does not intervene?