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Are taxpayers required to include all realized income in gross income? Explain.
How are realized income, gross income, and taxable income similar, and how are they different?
Compare the relative benefits of subsidies and high minimum prices to (a) the consumer; (b) the producer.
Why are agricultural prices subject to greater fluctuations than those of manufactured products?
The UK government introduced the Soft Drinks Industry Levy in April 2018. Explain how this tax works and discuss its impact on both soft drinks companies and consumer behaviour.
Illustrate on four separate diagrams (as in Figure 3.6) the effect of different elasticities of demand and supply on the incidence of a subsidy.
If the government increases the tax on a litre of petrol by 5p, what will determine the amount by which the price of petrol will go up as a result of this tax increase?
Discuss the relative merits of the different methods used by the All England Club to allocate tickets for Wimbledon each year.
Think of two things that are provided free of charge. In each case, identify whether and in what form a shortage might occur. In what ways are/could these shortages be dealt with? Are they the best solution to the shortages?
Assume that the (weekly) market demand and supply of tomatoes are given by the following figures:
\r\n| \r\n Price (£ per kilo) \r\n | \r\n\r\n 4.00 \r\n | \r\n\r\n 3.50 \r\n | \r\n\r\n 3.00 \r\n | \r\n\r\n 2.50 \r\n | \r\n\r\n 2.00 \r\n | \r\n\r\n 1.50 \r\n | \r\n\r\n 1.00 \r\n | \r\n
| \r\n Qd (000 kilos) \r\n | \r\n\r\n 30 \r\n | \r\n\r\n 35 \r\n | \r\n\r\n 40 \r\n | \r\n\r\n 45 \r\n | \r\n\r\n 50 \r\n | \r\n\r\n 55 \r\n | \r\n\r\n 60 \r\n | \r\n
| \r\n Qs (000 kilos) \r\n | \r\n\r\n 80 \r\n | \r\n\r\n 68 \r\n | \r\n\r\n 62 \r\n | \r\n\r\n 55 \r\n | \r\n\r\n 50 \r\n | \r\n\r\n 45 \r\n | \r\n\r\n 38 \r\n | \r\n
(a) What are the equilibrium price and quantity?
\r\n(b) What will be the effect of the government fixing a minimum price of (i) £3 per kilo; (ii) £1.50 per kilo?
\r\n(c) Suppose that the government paid tomato producers a subsidy of £1 per kilo. (i) Give the new supply schedule. (ii) What will be the new equilibrium price? (iii) How much will this cost the government?
\r\n(d) Alternatively, suppose that the government guaranteed tomato producers a price of £2.50 per kilo. (i) How many tomatoes would it have to buy in order to ensure that all the tomatoes produced were sold? (ii) How much would this cost the government?
\r\n(e) Alternatively, suppose it bought all the tomatoes produced at £2.50. (i) At what single price would it have to sell them in order to dispose of the lot? (ii) What would be the net cost of this action?
What are the advantages and disadvantages of speculation from the point of view of (a) the consumer; (b) firms?
Which of the following will have positive signs and which will have negative ones? (a) price elasticity of demand; (b) income elasticity of demand (normal good); (c) income elasticity of demand (inferior good); (d) cross elasticity of demand (with respect to changes in price of a substitute good); (e) cross elasticity of demand (with respect to changes in price of a complementary good); (f) price elasticity of supply.
Why are both the price elasticity of demand and the price elasticity of supply likely to be greater in the long run?
Assume that oil begins to run out and that extraction becomes more expensive. Trace through the effects of this on the market for oil and the market for other fuels.
Is there any truth in the saying that the price of a good is a reflection of its quality?
If you were the owner of a clothes shop, how would you set about deciding what prices to charge for each garment at the end-of-season sale?
If both demand and supply change, and if we know which direction they have shifted but not how much, why is it that we will be able to predict the direction in which either price or quantity will change, but not both? (Clue: consider the four possible combinations and sketch them if necessary: (a) D left, S left; (b) D right, S right; (c) D left, S right (d) D right, S left.)
For what reasons might the price of overseas holidays rise? In each case identify whether these are reasons affecting demand or supply (or both).
On separate demand and supply diagrams for bread, sketch the effects of the following: (a) a rise in the price of wheat; (b) a rise in the price of butter and margarine; (c) a rise in the price of rice, pasta and potatoes. In each case, state your assumptions.
The weekly demand and supply schedules for t-shirts (in millions) in a free market are as follows:
\r\n| \r\n Price (£) \r\n | \r\n\r\n 8 \r\n | \r\n\r\n 7 \r\n | \r\n\r\n 6 \r\n | \r\n\r\n 5 \r\n | \r\n\r\n 4 \r\n | \r\n\r\n 3 \r\n | \r\n\r\n 2 \r\n | \r\n\r\n 1 \r\n | \r\n
| \r\n Quantity demanded \r\n | \r\n\r\n 6 \r\n | \r\n\r\n 8 \r\n | \r\n\r\n 10 \r\n | \r\n\r\n 12 \r\n | \r\n\r\n 14 \r\n | \r\n\r\n 16 \r\n | \r\n\r\n 18 \r\n | \r\n\r\n 20 \r\n | \r\n
| \r\n Quantity supplied \r\n | \r\n\r\n 18 \r\n | \r\n\r\n 16 \r\n | \r\n\r\n 14 \r\n | \r\n\r\n 12 \r\n | \r\n\r\n 10 \r\n | \r\n\r\n 8 \r\n | \r\n\r\n 6 \r\n | \r\n\r\n 4 \r\n | \r\n
\r\n
(a) What are the equilibrium price and quantity?
\r\n(b) Assume that changes in fashion cause the demand for t-shirts to rise by 4 million at each price. What will be the new equilibrium price and quantity? Has equilibrium quantity risen as much as the rise in demand? Explain why or why not.
\r\n(c) Now plot the data in the table and mark the equilibrium. Also plot the new data corresponding to (b).
\r\n
Give two examples of positive statements about the economy, and two examples of normative ones. Now give two examples that are seemingly positive, but which have normative implications or undertones.
Assume that fracking becomes common across the UK. The result is that supplies of shale gas and oil increase sharply. Trace through the effects of this on the market for oil, gas and the market for other fuels.
Would redistributing incomes from the rich to the poor reduce the overall problem of scarcity?
In what way does specialisation reduce the problem of scarcity?
When you made the decision to study economics, was it a ‘rational’ decision (albeit based on the limited information you had available at the time)? What additional information would you like to have had in order to ensure that your decision was the right one?
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