Project #44874 - Business Economics

Lesson 4

a.       In lesson 4 we write the budget constraint as I = XPX + YPY.  Write this as a linear equation with Y on the left as in Y = … . What is the slope of this line. Explain this.

b.      In lesson 4 we discuss the pure income effects on income increases and decreases and of price inflation and deflation. Consider a 5% increase in income accompanied by a proportional 5% increase in prices. How will this affect the budget line, explain?

c.       If the income expansion line (lesson 4) is a straight line, the income elasticity of demand of both goods is equal to 1. Explain why – prove it.

d.      If there are n goods on which the consumer spends her budget, how many of them can be inferior? Explain.  

5.        Lesson 5

a.       Consider the transition from short run to long equilibrium in the model of perfect competition.

                                                               i.      What if technology were changing rapidly? How would this situation be different?

                                                             ii.      What if producers competed by differentiating their products? How would this situation be different? Could the assumptions of perfect competition still be maintained?

                                                            iii.      What if some firms had lower costs (better production technology or expertise) than others? How would that affect the conclusion that all firms earn the same normal profits?

b.      Considering the costs of monopoly, draw the case for the backward S-shaped total cost curve. How would you measure the deadweight loss in this case? [There may not be a single correct answer]. Explain.

Each question can be answered briefly. These are not essay questions. Make your answers clear and direct – and as brief as possible.

PLEASE USE THE ATTACHED PDF DOCUMENTS!!!!

Subject Business
Due By (Pacific Time) 10/29/2014 09:00 am
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