Economic Questions V

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You are welcome to ask questions on Economics. I am looking to explain economic principles / ideas/ recent developments in economics. Due to the volume of questions, I can no longer promise to answer. But, I will try if it meets below criteria.

I will post the answer on this blog, for everyone to benefit from. I never email individual answers

Please Bear In Mind

  1. Use google custom search (top right) to see if question has been asked. If I have already answered a question I don’t tend to repeat it.
  2. The replies will be guidance and not for duplication. Your essays should be your own work.
  3. Don’t ask me to do your coursework / assignment e.t.c. The answer will be published here where your teacher can see it.
  4. My speciality is economics for British A Level standard.
  5. I don’t answer university questions or maths calculations
  6. I am looking to explain economic principles / ideas/ recent developments in economics.
  7. I will answer as a new post. Check home page of blog for new post. With question and answers

I studied PPE at Lady Margaret Hall college, Oxford University, and currently work as an Economics A Level teacher. I have also examined several different economic units for Edexcel AS and A2.

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467 thoughts on “Economic Questions V”

  1. Hi Arthur
    Advertising elasticity of demand simply measures change in demand in result of change in advertisement Expenditure. Yes in some cases it may underestimate or overestimate change in demand. For example, in 1980 a citrate brand is being sold. Company spent one thousand dollar on advertisement. Next year company spent 1500 dollar on advertisement. But its sale does not increase . In case of Advertising elasticity of demand, it would show not much effect of increasing expenditure on Advertisement. Actually, It may possible if advertising expenditure were not increased, its sales could declined. So benefit of advertisements are underestimated here.
    In simple words, there may be many factors effecting demand, AED ignores them and some time it does not show real effect.

  2. Help please. A product has an elasticity of 3.43. If the firm raises the price, what do you expect to happen to quantity demanded? Answer – the demand goes down. What would happen if the elasticity was 0.5???

    Help please

  3. Hi John

    GDP means Gross Domestic Product and GPI means Genuine Progress Indicator. GDP calculates only economic growth but GPI watches economic growth with welfare.
    Actually GDP is more used in reality than GPI.
    Growth in GPI = Economic Growth-Cost of Economic growth(like pollution , resource depletion due to growth etc)
    Actually GPI is more theoretical and not used in practical.
    On the other hand GDP is one of most practical measurement of economic growth.
    GPI can never become an alternative to GDP. Yes GDP just watches economic growth and there are many other important things as we are human beings like our health, environment. So we should also need to improve our social and envoi mental growth.
    Thanks,
    Raj

  4. Hi Teresa

    In general we give price elasticity of demand in negative numbers like -.5 ,-.2 etc.
    Ok , suppose a product has price elasticity of demand 3.43(I think u mean -3.43)
    If price of product is increased at rate of 10% then its demand would decreased 34.3%.
    If price elasticity of demand is .5%, means if price increases by 10% then demand of product would decrease by 10%.

    Price elasticity of demand just describes change in demand due to the change in price of a product with assumption of other things remains same.
    Regards,
    Raj

  5. Hi Teresa
    I am in hurry, so I typed mistake value of second case. Correct line is this.
    If price elasticity of demand is .5%, means if price increases by 10% then demand of product would decrease by 5%.
    Thanks

  7. Hello,

    I would like to know which strategies American SMEs undertake in order to stay on the flow of the globolizing economy.

  8. Hi, I would like to ask about 4 questions. That is
    1.List five factors that will have impact on the hotel industry in Malaysia. For each of the factors, provide relevant examples to support your answer.

    2. Based on the factors above, explain the impact on the demand for rooms if there is a change in these factors. Provide relevant diagrams to support your answer.

    3. If government of your country decided to impose a minimum wages for employees in the hotel industry, explain the likely impact to the industry.(Hint: Use the concept of Minimum Pricing to explain)

    4.Many hotels would put up a signage “ask for our special price” usually at the reception counter. Explain how can this help in creating revenue to the firm?

    thanks

  9. Can you describe the current state of the U.S. economy as of January 2011 & describe the macro fiscal & monetary policy that should be implemented by the government & the Fed?

  10. Ive got a simple question though I cant really get round it, this is what Ive got: If im told that my company washes clothes and Ive got a total cost of $20600 Average fixed cost of $8422.76 average variable cost of $ 12177.24 and average production of 101477Kgs to which total cost ascends to $0.203 and per Kg variable costs of $0.12 and I receive an offer of outsourcing for $0.20 per Kg, Id like to know first the point of equilibrium given this data, also the % of Utilization of the plant given the information above. and finally if production increased to 150000Kg per month and using even a part of the installed capacity not used, would this imply a deacrese in costs?
    Thanks for your help

  11. can you answer this please?

    2.) Illustrating your answer with an aggregate demand and aggregate supply diagram, evaluate the likely effect of an increase in the fiscal deficit on the level of real output and on the price level. Refer to the multiplier effect in your answer

  12. I’ve calculated that the 2010 expected 1 year bond yield rates to be 1.744%, whereas the 2011 expected 1 year bond yield rates to be 1.38%.

    Ignoring risk premiums, can I reject the statement that expected one-year rates have changed substantially, and why?

  13. Recession decreases consumer spending. This creates a cycle which decreases demand and makes recession worse. Recession is decrease in GDP. Due to recession people will spend less and demand would be weakened. Due to this weak demand, industries will have to slow output. So there would be more unemployment and demand would go slow.
    So recession has a direct relation with consumer spending. Business becomes less profitable . Now consumer spending in England is increasing.

  14. Hi Olga
    Like all countries, SME s play very important role in American economy.
    Due to globalization , American SME have to compete with internal and externals companies.
    First of all they should make lobby and approach to Govt. for help.
    Second there should be coordination between SME of America. With this they can reduce compition between them & can reduce cost at some level.
    All American SME should united to meet the challenges of globalization.
    They should make a common roof . Alone they cannot save themselves from heavy rain.
    Third, they have problem with cheap labor of eastern countries like China, India etc. If possible at small level they may think to outsource (although this is not good in employment aspect)
    Fourth They should try to improve quality. Quality is an alternative to cost. Improved and better quality can help them to compete with Chinese and Indians. There are also many other things which are important.
    Thanks
    RAJ
    economicsvision.blogspot.com

  15. 1.what is the market equilibrium for fuel and car after war outbreak.
    2.Assuming the elasticity demand for car is elastic, who will bear more of the taxes imposed-suppliers or consumers

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