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Consider a household with income I and two goods to choose from - square feet of housing (x1) and dollars of other consumption (x2). Assume that price of other consumption is normalized to 1, and the annual price per square foot of housing is p, and the households tastes can be described by the utility function u(x1, x2) = (x1^0.25)(x2^0.75) (a) How much housing and other goods will the household demand as a function of p and I? (b) Suppose income is $100,000 and the price of housing is $10 per square foot. Then the government introduces a subsidy that lowers the housing price to $5 per square foot. In the attached graph, let the solid lines denote the budget lines of the household before and after the subsidy. What are the values of the intercept terms a, b and c in the graph? (c) How much of each good does the household consume at bundle A -i.e. what are the consumption levels of x1 and x2 at the utility maximizing bundle before the subsidy. How much would the household consume of each good after the subsidy (bundle B)? (d) Answer this part in terms of letters on the vertical axis of the graph. What is the most this household would be willing to pay in cash to get this price subsidy? If a household already had the subsidy (without having paid any cash to get it), what is the least that we would have to pay the household in cash for the household to be willing to give up the subsidy? (e) The expenditure function for this household is approximately E(p,U) = 1.755p0.25U. Calculate dollar values for the first question in part (d). (f) What is the dollar value for the second question in part (d)? (g) Explain intuitively why there is a deadweight (welfare) loss of implementing the subsidy using EV (equivalent variation), and then calculate the dollar value of the deadweight loss.
Using the following information complete the cash flow budget for the months of January, February and March. Be sure to include GST in the rows provided. GST at the end of December 2006 was negative $2500.
Discuss how the interplay between economies of density and the properties of hub-and-spoke networks give rise to economies of scope.
Why did the global economy fail to self-adjust during the Great Depression Specifically, why didn't sales and employment respond to the declining prices and wages as classical economists would predict
Consider the production function Q=100L^.5K^.4. Suppose L=1 and K=1 so that Q=100. Explain the nature of returns to scale for this production function.
Derive the profit maximizing price and the profits at this price. What is the demand elasticity at this price? What is the total demand when the monopolist charges a price P?
1. Why do you suppose that firms in Artic nations are already developing specialized tanker ships and platforms for use in privately accessible Artic areas 2. What are possible opportunity cost of opening Artic lands to private extracti..
Engel curve for soccer tickets.
A perfectly competitive firm faces a market price of $10 for its output X. It owns two plants, A and B, whose total costs are TCA = 10 + 2X + .25X2 (to the second power) TCB = 15 + .4X + .1X2 (to the second power).
Production costs chargeable to the finishing department in June for the Cascio company: Materials: $16,000, labor: $29,500, overhead: $18,000, equivalent units of production/materials: $20,000, conversion costs: $19,000
Company A plans to produce 300,000 units next year, the production budget is: Compute the total cost and cost per unit when the unit production is changed to 315,000 units.
Describe the factors that may cause economies and diseconomies of scale. Give an example of each. Describe the economic concept of the law of diminishing marginal returns. Please give an example. Why is this important?
How would income distribution and resource use change if a flat rate tax on comprehensive income were substituted for current progressive income tax in United States?
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