Eco403 GDB No. 1 fall 2011 solution

According to CIA World Fact Book, current population growth rate of Pakistan and China are 1.57% and 0.493% respectively. In both countries, ratio of females is more than males. Logically discuss that how this increasing ratio of females will affect the Gross Domestic Product (GDP) of both countries?

Solution:

In these two countries (as well as others) women are given a lower standard of education and are usually either at home or doing low paid work. So unless they get their act together really soon there will be many vacancies for skilled workers which cannot be filled , the result will be a lower rate of increase of the GDP over the coming years compared to the rate it would rise if women were properly educated and had access to skilled work.

ECO 403_GDB Solution

Unemployment is an economic problem as well as a social issue. It affects the living of all the people in a society whether they are young or old, educated or uneducated, skilled or unskilled. Why unemployment is increasing day by day in Pakistan? Write down at least one reason.

Answer:

Unemployment is increasing day by day in Pakistan due to many reasons. Reasons are job search and wage rigidity in the country.

• Job search:

1. Workers have different abilities and preferences.

2. Jobs have different skill requirements.

3. Geographic mobility of workers.

4. Flow of information is imperfect.

· Wage rigidity:

1. Minimum wage laws.

2. Labor unions.

3. Efficiency wages.

· Sectoral shifts.

· Unemployment insurance (This is for European countries)

ECO401 Assignment # 2 Solution:

Assignment # 2 Solution:

Question:

A firm operating in competitive environment faces the following price (P),quantity (Q), total fixed cost (TFC) and total variable cost (TVC) schedules respectively:

A. Calculate total revenue (TR), marginal revenue (MR), total cost (TC),marginal cost (MC) and profit (π) for each level of output (Q).

Solution:-

Q	P	TFC	TVC	TR	MR	TC	MC	π
400	2.5	150	750	1000	—	900	—	100
500	2.25	150	830	1125	1.25	980	0.8	145
600	2	150	905	1200	0.75	1055	0.75	145
700	1.75	150	995	1225	0.25	1145	0.9	80

B. Find the optimal level of output and price which maximizes firm’s profit.

Answer:-

As we know that profit is maximized at the point where MC = MR. The optimal level of Output (Q) and Price (P) at which maximizes firm’s profit is 600 and 2.

ECO401 GDB solution

Consider the markets of motor vehicles and fuel oil. If price of motor vehicles rises, what will happen to the demand of fuel oil? In which direction the demand curve for fuel oil will shift with a rise in price of motor vehicles?

Answer: Fuel Oil Demand will fall and its curve will shift to Left reflecting decrease.

ECO402 Assignment 1 idea solution

Question no 1:

a. Ali has certain amount of money and he has to spend on two goods apple and strawberries. Suppose Ali completely prefers strawberries than apple.
How you will see this particular situation in the consumer equilibrium theory?
b. Support your answer with the help of graph.

Answer
For the first question the answer is "corner solution.” As according to the corner solution, if a consumer buys in extremes and buys the entire one category of good mean completely prefer one good over the other .In this situation the indifference curves are tangent to the horizontal and vertical exist. For the graph look in the lecture number 8 page no 50 in the topic of corner solution.


Question no 2:
Keeping in view the given data for the construction of roads from the year 2000 to year 2004, calculate the nominal price for the roads construction in each year.
Note: Take year 2000 as base year where required.
For question number 2 the formula is given as follows
Nominal price = CPI (current year)/CPI (base year)*Real price.
Here is the solution for the first year. Solve others by similar formula.
Nominal Price for the year 2000 = 45.5/45.5*5550

Nominal Price for the year 2000= 5550

ECO403 Assignment 2 Idea solution

A):
Let an economy is characterized by the following equations:
C = 400 + 0.8(Y-T)
G = 300
T = 250
I = 200
CALCULATE the equilibrium level of output.
Answer aY=C+I+G
Y=400+0.8(y-T)+200+300
Y=400+0.8(?-250)+200+300
Y=400+200+300=900
(0.8y=?-T)=900
Y=900={(0.8y-250)}
Solving y=?
Y=(1-0.8=0.2)=900
Y=900/0.2=4500
Deduct tax=250
(Y-T)
Y=(4500-250)
Y=4250
Use the above figure to describe the short-run effects of an increase in taxes on
national income, the interest rate, the price level, consumption and investment.
Note: describe theoretically. Diagram is NOT required


Answer bInterest rate=
Interest rate will be increase


Price level=
Price level will be increase.
Consumption=
Consumption decrease due to increase in tax no one can be saving
Investment =
Investment will increase

Eco403 GDB Solution

Ali, a Pakistani resident, purchased a car worth Rs. 3, 00,000 that was produced entirely in China. Does this transaction affect Pakistan’s GDP? Justify your answer.

Note: Your answer must be within the range of 50-100 words.

Solution:

Yes this transaction will cause a decrease in Pakistan’s GDP.
GDP = C + I + G + NX
And
NX = Total Export – Total Import
This transaction will decrease the Net export which will also decrease the GDP.

::::::::::::::::::::::::::::::

GDP of a country is always equal to the = Consumption(C) + Investment(I) + Government purchases(G) + Net Export (NX)

in our question it has been said that car was manufactured by China. it means that it was imported from china.
formula for Net Export is = tolal export - total import
so, if we will import anything than it will decrease our net exports...
due to a decrease in net export will cause a decrease in GDP,,

Eco 401 Idea solution

Assignment No.01 Marks: 20

Question:

Suppose the market demand and market supply for Levis jeans is given by the following equations:

Qd = 5000 – 2.5P

Qs = 4000 + 1.5P

A. Find quantity demanded when price is Rs. 250, Rs. 450 and Rs. 650.

Quantity demand is found by putting the values of P in quantity demand equation.

1. When the price is Rs.250

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(250)

Qd = 4375 units

2. When price is Rs.450

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(450)

Qd = 3875 units

3. When price is Rs.650

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(650)

Qd = 3375 units

B. Find quantity supplied when price is Rs. 200, Rs. 400 and Rs. 600.

Quantity supplied is found by putting the values of P in quantity supplied equation.

1. When the price is Rs.200

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(200)

Qs = 4300 units

2. When price is Rs.400

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(400)

Qs = 4600 units

3. When price is Rs.600

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(600)

Qs = 4900 units

C. Find equilibrium price and equilibrium quantity with the help of above equations.

The equilibrium price for Levis jeans is found by equating Qd and Qs.

At equilibrium, the quantity demand and quantity supply must equal

Qd=Qs

5000 – 2.5P= 4000 + 1.5P

5000-4000=1.5P+2.5P

1000=4P

P=1000/4=250Rs.

Equilibrium price =Rs.250

Equilibrium quantity can found by putting this price in equation of quantity demand or quantity supply

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(250)

Qs = 4375 units

Note:

At equilibrium, at equilibrium, the quantity demand and quantity supply must equal

Qd=Qs

Equilibrium price at 250

5000 – 2.5(250) = 4000 + 1.5(250)

4375 units=4375 units

D. Show the equilibrium condition in Levis jeans market graphically.

Eco401 GDB No. 2 solution

Total Marks 2

Starting Date Friday, January 28, 2011

Closing Date Tuesday, February 01, 2011

Status Open

Question/Description

Unemployment is an economic problem as well as a social issue. It affects the living of all the people in a society whether they are young or old, educated or uneducated, skilled or unskilled. The job of “network administrator” at Virtual University of Pakistan requires special computer skills and applications are invited to fill this position. But a lot of unemployed persons who are looking for work these days don’t have these particular skills.

With reference to the above scenario, which type of unemployment these unemployed persons are facing?

Note: Your answer must not exceed from 25 words.

SOLUTION:
Mostly these people are facing the problem of lf and aj type of unemployment because the post on which the higher educated persons can not apply anl skills persons can not be given a job

Eco401 GDB No. 01 Solution

Idea Solution.

The elasticity of supply measures the responsiveness the quantity supplied to a change in the price of that commodity.

Because supply curves slope upwards, the elasticity of supply is positive. As we move along a supply curve, positive price changes are associated with positive output changes. An increase in price causes an increase in quantity sold. The more elastic is supply the larger the percentage increases in quantity supplied in response to a given percentage change in price. Thus elastic supply curves are relatively flat and inelastic supply curves relatively steep.

There are important special cases. If the supply curve is vertical, -the quantity supplied does not change as prices changes- elasticity of supply is zero. A horizontal supply curve has an infinitely high elasticity of supply: A small drop in price would reduce the quantity producers are willing to supply from an indefinitely large amount to zero

Eco401 GDB No. 1 Announced

ECO401 - Economics Graded Discussion Board

Total Marks 2

Starting Date Friday, November 12, 2010

Closing Date Tuesday, November 16, 2010

Status Open

Question/Description

The elasticity of supply measures the percentage change in the quantity supplied of a commodity as a result of percentage change in its price. It is a pure number and is positive because price and quantity move in the same direction. In general, percentage change in elasticity is used instead of absolute change in elasticity. The slope of supply is an unsatisfactory measure of the responsiveness in the quantity supplied of a commodity with respect to the change in its price but the concept of elasticity of supply has overcome this difficulty.

With reference to the above scenario, why is the slope of supply an unsatisfactory measure of the responsiveness in the quantity supplied of a commodity to a change in its price?

Note: Your answer must be within the range of 75-100 words.

Eco402 GDB Solution

There can not be any doubt in the minds of economists, sociologists, geologists or the general public that the earth does have only a finite amount of mineral resources such as coal and iron. During the past century, the demand of these resources increased over time however the prices of these natural resources have declined or remained roughly constant relative to overall prices. Why the price is not change rapidly?

Note: Your answer must not exceed 50 words.
...............

Solution:

According to the rule of economics when demand increases price also increases but in this case we can not apply this formula because price is not increasing.because these resources are God gifted.these are increasing with time because with more latest technology and study and research about the hidden area of earth.

price only that time increase when supply decrease. in this case supply is increasing more rapidly than demand. so there is no change in price.

ECO 402 11 November last date

Market equilibrium (topic)

There can not be any doubt in the minds of economists, sociologists, geologists or the general public that the earth does have only a finite amount of mineral resources such as

coal and iron. During the past century, the demand of these resources increased over time however the prices of these natural resources have declined or remained roughly constant relative to overall prices. Why the price is not change rapidly?

Decrease in the cost of production has increased the supply by more than enough due to latest technology use now days. That is why the price of coal and iron is unchanged or constant over the period of time. Second factor is their substitute like Furnas oil and natural gas for coal and for the iron new trend has developed by using plastic in production like in automobile industry.

Eco401 Online Quiz

For solved online Quizzes & Papers pls visit Solved Online Quizzes & Past Papers

Question # 1 of 15 ( Start time: 07:45:05 PM ) Total Marks: 1
Which of the following is true about the entrepreneur?
Select correct option:

An entrepreneur is an innovator.
An entrepreneur is someone who brings resources together and produces a product.
An entrepreneur is a risk taker.
All of the given options are correct.

Question # 2 of 15 ( Start time: 07:46:04 PM ) Total Marks: 1
Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:
Select correct option:

The demand for both Y and Z will increase.
The demand for Y will increase while the demand for Z will decrease.
The demand for Y will decrease while the demand for Z will increase.
The demand for both Y and Z will decrease.

Question # 3 of 15 ( Start time: 07:47:05 PM ) Total Marks: 1
If the income elasticity of demand for boots is 0.2, a 10% increase in consumer income will lead to a:
Select correct option:

20% increase in the quantity of boots demanded.
20% decrease in the quantity of boots demanded.
2% increase in the quantity of boots demanded.
0.2% increase in the quantity of boots demanded.

Question # 4 of 15 ( Start time: 07:48:27 PM ) Total Marks: 1
A person with a diminishing marginal utility of income:
Select correct option:

Will be risk averse.
Will be risk neutral.
Will be risk loving.
Cannot decide without more information.

Question # 5 of 15 ( Start time: 07:49:13 PM ) Total Marks: 1
Assume Leisure is a normal good. If income effect equals substitution effect then a wage rate increase will lead a person to:
Select correct option:

Increase hours of work
Decrease hours of work
Not change hours of work
None of the given options


Question # 6 of 15 ( Start time: 07:50:10 PM ) Total Marks: 1
The substitution effect of a price decrease for a good with a normal indifference curve pattern:
Select correct option:

Is always inversely related to the price change.
Measures the change in consumption of the good that is due to the consumer's feeling of being richer.
Is measured by the horizontal distance between the original and the new indifference curves.
Is sufficient information to plot an ordinary demand curve for the commodity being considered.

Question # 7 of 15 ( Start time: 07:51:25 PM ) Total Marks: 1
More output could be produced with available resources if:
Select correct option:

Resources are allocated efficiently.
Resources are imperfectly shiftable among alternative uses.
Prices are reduced.
The economy is operating at a point inside the production possibilities curve.

Question # 8 of 15 ( Start time: 07:52:09 PM ) Total Marks: 1
A new technology which reduces costs for firms:
Select correct option:

Shifts the supply curve to the right.
Shifts the supply curve to the left.
Reduces the equilibrium quantity.
Raises the equilibrium price.

Question # 9 of 15 ( Start time: 07:52:57 PM ) Total Marks: 1
If consumer incomes increase, the demand for product Y:
Select correct option:

Will necessarily remain unchanged.
Will shift to the right if Y is a complementary good.
Will shift to the right if Y is a normal good.
Will shift to the right if Y is an inferior good.

Question # 10 of 15 ( Start time: 07:54:07 PM ) Total Marks: 1
The study of economics basically focuses on:
Select correct option:

For whom resources are allocated to increase efficiency.
How society spends the income of individuals.
How scarce resources are allocated to fulfill society's goals.
What scarce resources are used to produce goods and services.

Question # 12 of 15 ( Start time: 07:55:15 PM ) Total Marks: 1
A partial explanation for the inverse relationship between price and quantity demanded is that a:
Select correct option:

Lower price shifts the supply curve to the left.
Higher price shifts the demand curve to the left.
Lower price shifts the demand curve to the right.
Higher price reduces the real incomes of buyers.
Question # 13 of 15 ( Start time: 07:56:31 PM ) Total Marks: 1
Demand is elastic when the elasticity of demand is:
Select correct option:

Greater than 0.
Greater than 1.
Less than 1.
Less than 0.


Question # 14 of 15 ( Start time: 07:57:34 PM ) Total Marks: 1
Which of the following is not an assumption of ordinal utility analysis?
Select correct option:

Consumers are consistent in their preference.
Consumers can measure the total utility received from any given basket of good.
Consumers are non-satiated with respect to the goods they confront.
All are necessary.

Question # 15 of 15 ( Start time: 07:58:17 PM ) Total Marks: 1
Suppose we find that the cross-price elasticity of demand for two products is a negative number. We know that:
Select correct option:

The two goods are normal goods.
The two goods are inferior goods.
The two goods are substitutes.
The two goods are complements.

.........

Question # 1 of 15 ( Start time: 08:00:58 PM ) Total Marks: 1
Assume that the government sets a ceiling on the interest rate that banks charge on loans. If the ceiling is set below the market equilibrium interest rate, the result will be:
Select correct option:

A surplus of credit.
A shortage of credit.
Greater profits for banks issuing credit.
A perfectly inelastic supply of credit in the market place.

Question # 2 of 15 ( Start time: 08:02:05 PM ) Total Marks: 1
Suppose the price of railway ticket decreases, what will happen in the market for airline travel?
Select correct option:

The demand curve for airline travel shifts left.
The demand curve for airline travel shifts right.
The supply curve of airline travel shifts left.
The supply curve of airline travel shifts right.

Question # 3 of 15 ( Start time: 08:03:18 PM ) Total Marks: 1
Our economy is characterized by:
Select correct option:

Unlimited wants and needs.
Unlimited material resources.
No energy resources.
Abundant productive labor.

Question # 4 of 15 ( Start time: 08:04:05 PM ) Total Marks: 1
Which of the following is a characteristic of a mixed economy?
Select correct option:

In mixed economy, resources are governed by both government and individuals.
Mixed economy utilizes the characteristics of both market economy and planned economy to allocate goods and services.
People are free to make their decisions and government controls the Defence.
All of the given options are true.

Question # 5 of 15 ( Start time: 08:04:47 PM ) Total Marks: 1
The total utility curve for a risk neutral person will be:
Select correct option:

Straight line.
Convex.
Concave.
None of the given options.

Question # 6 of 15 ( Start time: 08:05:35 PM ) Total Marks: 1
The short run, as economists use the phrase, is characterised by:
Select correct option:

All inputs being variable.
At least one fixed factor of production and firms neither leaving nor entering the industry.
No variable inputs - that is, all of the factors of production are fixed.
A period where the law of diminishing returns does not hold.

Question # 7 of 15 ( Start time: 08:06:43 PM ) Total Marks: 1
In pure capitalism, freedom of enterprise means that:
Select correct option:

Businesses are free to produce products that consumers want.
Consumers are free to buy goods and services that they want.
Resources are distributed freely to businesses that want them.
Government is free to direct the actions of businesses.

Question # 8 of 15 ( Start time: 08:07:04 PM ) Total Marks: 1
A market is said to be in equilibrium when:
Select correct option:

Supply equals Price.
There is downward pressure on price.
The amount consumers wish to buy at the current price equals the amount producers wish to sell at that price.
All buyers are able to find sellers willing to sell to them at the current price.

Question # 9 of 15 ( Start time: 08:07:54 PM ) Total Marks: 1
The correlation between an asset's real rate of return and its risk (as measured by its standard deviation) is usually:
Select correct option:

Positive.
Strictly linear.
Flat.
Negative.

Question # 10 of 15 ( Start time: 08:09:01 PM ) Total Marks: 1
The cross elasticity of demand of complements goods is:
Select correct option:

Less than 0.
Equal to 0.
Greater than 0.
Between 0 and 1.

Question # 11 of 15 ( Start time: 08:10:02 PM ) Total Marks: 1
Indifference curves that are convex to the origin reflect:
Select correct option:

An increasing marginal rate of substitution.
A decreasing marginal rate of substitution.
A constant marginal rate of substitution.
A marginal rate of substitution that first decreases then increases.

Question # 12 of 15 ( Start time: 08:10:44 PM ) Total Marks: 1
We know that the demand for a product is elastic if:
Select correct option:

When price rises, revenue rises.
When price rises, revenue falls.
When price rises, quantity demanded rises.
When price falls, quantity demanded rises.

Question # 13 of 15 ( Start time: 08:11:35 PM ) Total Marks: 1
Goods X and Y are complements while goods X and Z are substitutes. If the supply of good X increases:
Select correct option:

The demand for both Y and Z will increase.
The demand for Y will increase while the demand for Z will decrease.
The demand for Y will decrease while the demand for Z will increase.
The demand for both Y and Z will decrease.

Question # 14 of 15 ( Start time: 08:12:40 PM ) Total Marks: 1
When an industry's raw material costs increase, other things remaining the same:
Select correct option:

The supply curve shifts to the left.
The supply curve shifts to the right.
Output increases regardless of the market price and the supply curve shifts upward.
Output decreases and the market price also decrease.

Question # 15 of 15 ( Start time: 08:13:06 PM ) Total Marks: 1
The numerical measurement of a consumer's preference is called:
Select correct option:

Satisfaction.
Use.
Pleasure.
Utility.

...........

Question # 1 of 15 ( Start time: 08:15:23 PM ) Total Marks: 1
The extra value that consumers receive above what they pay for that good is called:
Select correct option:
Producer surplus.
Utility.
Marginal utility.
Consumer surplus.

Question # 2 of 15 ( Start time: 08:16:11 PM ) Total Marks: 1
Consider two commodities X and Y. If the cross-elasticity of demand is positive, it means the goods are:
Select correct option:
Independent.
Complements.
Substitutes.
Inferior.

Question # 3 of 15 ( Start time: 08:16:54 PM ) Total Marks: 1
At any given point on an indifference curve, the the slope is equal to:
Select correct option:
Unity.
The marginal rate of substitution.
The consumer's marginal utility.
None of the given options.

Question # 4 of 15 ( Start time: 08:18:17 PM ) Total Marks: 1
When the price of petrol rises by 8%, the quantity of petrol purchased falls by 6%. This shows that the demand for petrol is:
Select correct option:
Perfectly elastic.
Unit elastic.
Price elastic.
Price inelastic.

Question # 5 of 15 ( Start time: 08:16:54 PM ) Total Marks: 1
If the cost of computer components falls, then
Select correct option:
The demand curve for computers shifts to the right.
The demand curve for computers shifts to the left.
The supply curve for computers shifts to the right.
The supply curve for computers shifts to the left.

Question # 6 of 15 ( Start time: 08:21:02 PM ) Total Marks: 1
The correlation between an asset's real rate of return and its risk (as measured by its standard deviation) is usually:
Select correct option:
Positive.
Strictly linear.
Flat.
Negative.

Question # 7 of 15 ( Start time: 08:22:18 PM ) Total Marks: 1
We know that the demand for a good or service is inelastic if:
Select correct option:
When price rises, quantity demanded rises.
When price rises, quantity demanded falls.
When price rises, total revenue rises.
When price rises, total revenue falls.

Question # 8 of 15 ( Start time: 08:23:12 PM ) Total Marks: 1
Which of the following is not an assumption of ordinal utility analysis?
Select correct option:
Consumers are consistent in their preference.
Consumers can measure the total utility received from any given basket of good.
Consumers are non-satiated with respect to the goods they confront.
All are necessary.

Question # 9 of 15 ( Start time: 08:24:38 PM ) Total Marks: 1
If your demand price for one unit of a good is Rs. 100 and the market price is Rs. 75, your consumer's surplus will be:
Select correct option:
Rs.25.
Rs.50.
Rs.75.
Rs.100.

Question # 10 of 15 ( Start time: 08:26:02 PM ) Total Marks: 1
A market is said to be in equilibrium when:
Select correct option:
Supply equals Price.
There is downward pressure on price.
The amount consumers wish to buy at the current price equals the amount producers wish to sell at that price.
All buyers are able to find sellers willing to sell to them at the current price.

Question # 11 of 15 ( Start time: 08:26:32 PM ) Total Marks: 1
Which of the following does NOT refer to macroeconomics?
Select correct option:
The study of the aggregate level of economic activity.
The study of the economic behavior of individual decision-making units such as consumers, resource owners, and business firms.
The study of the cause of unemployment.
The study of the cause of inflation.

Question # 12 of 15 ( Start time: 08:27:39 PM ) Total Marks: 1
Which of the following defines the opportunity cost?
Select correct option:
It is measured only in rupees.
It is the cost to society of producing the goods.
It is the difficulty associated with using one good in place of another.
It is the cost of next best alternative forgone.

Question # 13 of 15 ( Start time: 08:28:37 PM ) Total Marks: 1
The law of increasing opportunity costs states that:
Select correct option:
The more one is willing to pay for resources, the larger will be the possible level of production.
Increasing the production of a particular good will cause the price of the good to rise.
In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
Only by keeping production constant can rising prices be avoided.

Question # 14 of 15 ( Start time: 08:30:03 PM ) Total Marks: 1
The marginal rate of substitution is equal to the:
Select correct option:
Magnitude of the slope of the indifference curve
Relative price
Marginal cost of each good
Slope of the budget line

Question # 15 of 15 ( Start time: 08:31:02 PM ) Total Marks: 1
If the income elasticity of demand is 1/2, the good is:
Select correct option:
A luxury.
A normal good (but not a luxury).
An inferior good.
A Giffen good.