Fall 1999: Homework 2-
Part I:
Question 1- The table below records the quantities of beef demanded and supplied by Cattleland recently.
|
price per pound
|
quantities demanded thousand pounds
|
quantities supplied thousand pounds
|
|
$1.5
|
190
|
70
|
|
$2.2
|
162
|
210
|
a) Assume both demand and supply curves are linear. Graph the market situation. Be sure you label the demand curve, supply curve and both axis.
b) What are the equations for the demand and supply curves?
c) What is the equilibrium price and quantity?
The following questions - d), e), and f) - are all different scenarios. Treat each as a separate event.
d) Suppose that the government, due to the pressure of farmers, imposes a price floor of $2.1. Analyze the impact of this legislature. Specifically, calculate the resulting shortage or surplus.
e) Suppose some disease causes great loss of both residents and cattle. Describe the change in the demand and supply curves. Specify whether it is a shift or a movement along the curve. What can we predict about the equilibrium price and quantity relative to their initial level?
f) Suppose the government wants to restrict the equilibrium quantity of beef to 150,000 pounds. How large an excise tax should be imposed to achieve this goal?
Calculate the change in consumer surplus and the dead weight loss of the society.
Show the market situation in the graph and shade the area representing deadweight loss to the society.
Question 2- Suppose beef and fruit are the only goods produced in Cattleland. Below are data concerning economic performance in Cattleland in 1998.
|
|
Final Output thousand pounds
|
Price |
|
beef
|
210
|
$2.0
|
|
fruit
|
430
|
$0.3
|
a) What is the nominal value of GDP in Cattleland in 1998?
b) Suppose in 1998, compensation for employees in Cattleland is $345,000, rent is $80,000, interest is $35,000, personal consumption expenditure is $315,000, gross domestic investment is $120,000, government purchases is $75,000. How much should the profit be? What can we say about the international trade condition of Cattleland? Identify clearly any definitions and formulas you use.
c) If GDP per capita is $ 4,300, what is the population of Cattleland?
d) Suppose capital depreciation is $3,000, what is the NNP of Cattleland in 1998?
PART II:
Read an article from an economic or financial publication that has relevance for what we are learning in this class. The "accepted" list of publications is Wall Street Journal, Financial Times, The Economist, Barron's, and Business Week. Obviously, this list is not intended to be comprehensive. If you find a good and interesting article in any publication, printed or on the Internet, you are invited to read it.
Write a one page (single spaced, font 10) review of the article you just read. Attach a copy of the original article.
Your review will be graded according to its relevance for this class, the ideas you put forward, and your knowledge of written English.