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In a market where the supply curve is perfectly inelastic, how does an excise tax affect the price paid by consumers and the quantity bought and sold?
Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury like perfume? Explain.
That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?
For example, as you move up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that?
Transatlantic air travel in business class has an estimated elasticity of demand of 0.40 less. Why do you think Transatlantic air travel is the case?
Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?
Suppose cross-price elasticity of apples with respect to price of oranges is 0.4, and price of oranges falls by 3%. What will happen to the demand for apples?
What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
Would you advise the company to raise the price, lower the price, or to keep the price the same? What if the elasticity were 0.6? What if it were 1?
Under what conditions can carmakers pass very little of this cost along to car buyers?
If the selected investment pays simple interest, what interest rate would be required for the amount to grow from $60,000 to $90,000.
Identify some of the benefits and some of the costs to host country from allowing a multinational corporation to locate in a country with a developing economy.
Where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion?
The equation for a supply curve is P = 3Q - 8. What is the elasticity in moving from a price of 4 to a price of 7?
In what sense is there a tension between these two facts? What is odd about China's situation relative to conventional macroeconomic wisdom?
What happens to private saving, total saving, and investment in the three scenarios? Why? (Assume foreign saving does not change.)
If the government keeps its primary budget in balance, what is the growth rate of its debt? Why?
Discuss the various arguments about what effect this will have on the investment rate today.
How do you think the fiscal problem will likely be solved? (d) How would you suggest the problem be solved?
How does this fraction compare with the fraction for the economy overall? If there is a difference, what do you think explains the difference?
Discuss the extent to which the U.S. trade deficit and net foreign debt are serious economic problems.
Use the national income identity (the investment savings version) to provide a hypothesis that could explain what was going on.
Discuss your findings: What do they mean for the case for free trade? (Be sure to note how the North would fare under autarky.)
Find an entrance fee that the North can charge so that workers in both the North and the South will be better off.
Politics and trade: Suppose you are the economic adviser to a candidate running. Draft a onepage speech on trade for the candidate to give in these areas.