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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.
Related
Which has more elastic demand: hamburger or beef?
Higher prices always yield higher revenues. Do you agree or disagree? Why?
This is a past year question for A-level i.e. M/J/05 paper 1 Q.28
Question: The demand for US imports in Japan is price- inelastic.
Assuming the is no change in their dollar price, what would be the effect of a depreciation in the yen on the total value of US goods imported into Japan?
Answer from marking scheme:
increase of value measured in yen, decrease of value measured in $.
Can you explain how to get the answer please? And is value = price x quantity?
The UK economy is currently facing significant increases in the prices of the raw materials that it imports, most notably oil and copper. Explain using the AS/AD model how this is likely to affect national output as well as the price level.
Consider a small country that is a net importer of wheat which is the country’s main food staple. Using the concepts of producer surplus and consumer surplus, contrast the economic impact of a deficiency payments policy with that of a managed market policy (import taxes, etc.) as alternatives to increase the revenues of wheat producers. Use a diagram to illustrate your answer, and carefully define all your terms.
Hi Jaxin
1.If demand is inelastic then price is not important means demand will not change with change in price. Suppose US exports goods to Japan & Demand for these goods is inelastic. So total quantity would not change.
2. After depreciation of yen, total import measured in Yen would increase because you have to pay more yens for goods.
3. But Value of import in US dollar would not change directly because only Yen depreciated and nominal value of dollar remained same. Nominal Value of import in US dollar would not change theoretically.
4. Yes you are all right. Value= price* quantity
Hello Brian
There is no rule of thumb about which good has what price elasticity of demand. It depends on many things like substitution of burger or beef. A good substitution makes demand more elastic and types of consumers. Effect of change in price on rich consumers would be less and there are many other things like habits etc.
Higher prices do not always increase revenue. It depends on elasticity of demand. If good or service is highly elastic , then increase in price can decrease demand heavily and total revenue may decrease.
Country X has a world class economic infrastructure. To attract foreign direct investors, the country’s national government invested a huge amount of money to improve economic infrastructure in the country. The government also provided foreign investors with generous investment incentives. For instance, foreign companies starting up new businesses in the country would be awarded a ten-year tax holiday which would start one year after the start of production operations. In addition, foreign companies would be allowed 100 percent ownership of their businesses.
These measures, together with others, led to the inflow of substantial capital investment into the country. Foreign factories sprang up in and around cities which sprawled considerably. Local economies boomed as a result of those investments. Local incomes soared, as did the number of employed locals. However, there were several problems. Migrations from rural areas to urban centers increased significantly, leading to urban overcrowding, substantial incidence of crimes, and traffic congestions In addition, there were high levels of air pollution and industrial waste
Questions:
01.Name all negative externalities and one positive externality in this case.
02.Select one negative externality and show how the government can use fiscal policy (i.e., increases/decreases in taxes and public spending) to deal with it.
03.If the government imposes a very high tax on the profits of the companies investing in the country, what would happen to aggregate supply curve in the country? Draw a graph to show this effect.
Identify all the components of the Quantity Theory of Money and explain the basic assumption concerning Velocity. Then, use the Quantity Theory of Money to show how inflation can occur from an increase in the Money Supply. (you may make up your own numbers for both the initial and final conditions)
hi, I have difficulty with this question which is about fiscal policy..
May you help me please??
thanks a lot~
An economy is operating with output $400 billion below its natural rate, and fiscal policymakers want to close this recessionary gap. The central bank agrees to adjust the money supply to hold the interest rate constant, so there is no crowding out. The marginal propensity to consume is 4/5, and the price level is completely fixed in the short run.
a. In what direction and by how much would government spending need to change to close the recessionary gap? Explain your thinking.
b. In what direction and by how much would taxes need to change to close the gap? Explain.
c. If the central bank were to hold the money supply, rather than the interest rate, constant in response to the change in fiscal policy, would your answers to the previous questions be larger, smaller, or the same? Explain.
d. If policymakers in this economy wanted to close the recessionary gap without increasing the government’s budget deficit, what are two ways they can accomplish this goal?
Using a graph explain the meaning and causes of equilibrium unemployment
‘along the consumption function income changes more then consumption.’why? what does this say about mpc and mps plz explain?
Is there any macroeconomic invisible hand to ensure that saving and investment balance at full employment?explain without using ISLM. (6marks)
The problems in the global banking system have affected most economies of the world.
Examine how the UK government of that country has adjusted its monetary and fiscal policy in response to the world downturn. Explain the reasoning behind these adjustments.
Thank you so much
Hi Badria
Positive externalities are economic growth, employment , increasing income etc
Negative externalities are pollution, more assets in foreign hands, may increase current account deficit as more money in form of profit will go outside, national companies may not grow, Due to less taxes and less wages there may be exploration of resources etc.
Damage to environment is really a negative externality. Government can impose a some extra tax for environment fund which would purely be used for improving local environment. We can take price at y-axis and aggregate supply at x-axis.
If Govt increases tax at high rate, aggregate supply would go down because this will reduce profits and investment and companies may increase price to improve their profits which may decrease aggregate demand.