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- the fictional economy of Econland, where you've been hired as the Chief Main Content Economist, functions: the market for fruit can be defined by the following demand and supply QD = 90-3P QS = 12+5P a) Solve for equilibrium price and quantity in the market for fruit in Econland (keep answers accurate to 2 decimal places). The President of Econland would like to be re-elected. As part of her re-election campaign, she aims to keep fruit prices low. She proposes 2 different policies, and asks your opinion on both. Policy 1: a price ceiling of $10 Policy 2: a price ceiling of $8 b) Solve for equilibrium price and quantity in the market for fruit under Policy 1. Is there a shortage/surplus in this market? If so, by how much? c) Solve for equilibrium price and quantity in the market for fruit under Policy 2. Is there a shortage/surplus in this market? If so, by how much?Derive the Slutsky equation. What is the significance of this equation? What is the difference between the Hicksian and the Marshallian demand functions?Suppose there are 191 identical consumers interested in good X and the demand for X of person i is given by x₁ = 142-p/8 where p denotes the price of good X. Find the aggregate demand for good X and the inverse aggregate demand and enter below the slope of the inverse aggregate demand.
- Classical economists think prices and quantities respond to supply and demand and the economy produces its potential output over time. However, Keynesian economists believe pricing and wage rigidities may lower the economy's long-term equilibrium output. What is the Price-wage rigidity?In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. Consider a soybean farmer who expects a price level of 100 in the coming year. If the actual price level turns out to be 90, soybean prices will(FALL, RISE, OR REMAIN THE SAME) , and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by (REDUCING OR INCREASING) the quantity of soybeans supplied. If other producers in this economy mistake changes in the price level for changes in their relative prices, the unexpected decrease in the price level causes the quantity of output supplied to (RISE ABOVE OR FALL BELOW)…The following graph plots aggregate demand (AD2027AD2027) and aggregate supply (AS) for the imaginary country of Cotopaxi in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will be given by the curve labeled ADAADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate demand in 2028 will be given by the curve labeled ADBADB, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 2027 and 2028, depending on whether the economy moves from the initial price level of 102 to the…
- The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD1AD1 to AD2AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion. Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand. Change required to increase AD Expected rate of return on investment. (decrease/increase) Incomes in other countries (decrease/increase) Consumer expectations about future profitability. (improve/worsen) Government spending (increase/decrease)Your company sells wristwatches in three separate markets: China, Japan and Korea. The demand curves are 9c = 50 9j = 75 - - qk 100 4 2 Pc P₁ · Pk. a) Calculate and plot the inverse demand curve for each market. b) Calculate your aggregate demand curve. c) Calculate and plot your inverse aggregate demand curve.The Greek letter a represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that a = $2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion. Suppose the natural level of output is $60 billion of real GDP and that people expect a price level of 95. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 85, 90, 95, 100, and 105. PRICE LEVEL 125 120 115 110 105 100 95 90 85 80 75 0 10 20 40 50 60 70 30 OUTPUT (Billions of dollars) 80 90 100 O AS LRAS ? The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that…
- Identify any two factors that will cause a shift to the supply of dollars curve.MARKET EQUILIBRIUM & POLICY WORKSHEET This question examines the market for bananas. You will use the formulas for a demand and supply curve to identify the quantity of bananas demanded and the quantity of bananas supplied at different prices. Below, you have the formulas for the demand curve and the supply curve for pounds of bananas. If you plug any price into the formula for the demand function, you get the quantity demanded at that price. If you plug any price into the supply function, you get the quantity supplied at that price. The Demand Function for bananas: Q-25-2P The Supply Function for bananas: Q-3P Task 1: Use the table below to find the quantity demanded and the quantity supplied of pounds of bananas at each price. Price (per pound of bananas) $2 4 6 8 10 Quantity of Bananas Quantity of Bananas Demanded (pounds) 21 9 Supplied (pounds) 12 Task 2: At a price of $4, is there a shortage or surplus of bananas? How many pounds? Task 3: At a price of $8, is there a shortage or…In the short run, the quantity of output supplied by firms can deviate from the natural level of output if the actual price level deviates from the expected price level in the economy. A number of theories explain reasons why this might happen. For example, the misperceptions theory asserts that changes in the price level can temporarily mislead firms about what is happening to their output prices. Consider a soybean farmer who expects a price level of 100 in the coming year. If the actual price level turns out to be 90, soybean prices will (decrease/not change/increase) , and if the farmer mistakenly assumes that the price of soybeans declined relative to other prices of goods and services, she will respond by (raising/lowering) the quantity of soybeans supplied. If other producers in this economy mistake changes in the price level for changes in their relative prices, the unexpected decrease in the price level causes the quantity of output supplied to (fall short of/exceed) the…