The Global Environment of Business:
Question 1: The IPAD 2 replaced the IPAD 1 and we can assume they are substitutes. RIM recently introduced the PLAYBOOK and we can assume it is also a substitute for both IPADs.
a) Explain what will happen to the equilibrium prices and quantities of the IPAD 2 and the PLAYBOOK if the price of touch screens rises as a result of the devastation in Japan.
b) Proposed copyright legislation will force PLAYBOOK users to pay a fee to copy electronic media between devices because their format changes, whereas there will be no impact on IPAD (1 or 2) users since there is no format change when moving between devices (Mac computers and IPADs, for example).
If this legislation is adopted what impact will it have on the equilibrium prices and quantities of the PLAYBOOK and the IPAD 2. Will there be an impact on the IPAD 1 market? Why?
c) What is more likely to explain an increase in equilibrium IPAD 2 prices and a reduction in equilibrium PLAYBOOK output: an increase in the number of IPAD 2 apps or an increase in the number of PLAYBOOK apps? Be sure to explain why you did not choose the other option.
Question 2. This question requires to do a bit of math, and you must include graphs in your answers.
a) If monetary policy is expected to tighten over the next few years, does that suggest the term structure will be upward sloping? Why?
b) What does that imply for the distribution of current and future consumption?