AssignmentTotal marks: 60 (20 marks) Using demand and supply curves show the impact of the...

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AssignmentTotal marks: 60 	(20 marks) Using demand and supply curves show the impact of the following:  Make sure you label your axis, your supply and demand curves, as well as the movement of price (P to P1) and quantity (Q to Q1). 	The impact of a price decrease of rice on the market for potatoes:     	 		 			 		 		 			 			 		 	  Impact on price:Impact on quantity: 	The expectation of a price increase on the market for coffee:     	 		 			 		 		 			 			 		 	  Impact on price:Impact on quantity: 	The impact of a decrease in the price of memory chips on the market for computers:     	 		 			 		 		 			 			 		 	  Impact on price:Impact on quantity: 	The impact of an increase in excise taxes on refrigerators on the market for refrigerators:     	 		 			 		 		 			 			 		 	  Impact on price:Impact on quantity: 	The impact of the government imposing a price ceiling on apartment rents:     	 		 			 		 		 			 			 		 	  Impact on rental price:Impact on quantity supplied:Impact on quantity demanded: 	If the demand for many farm products is inelastic, why would a bad crop, that is, fewer crops harvested, be to the advantage of farmers? Use demand and supply curves to illustrate your answer.   	 		 			 		 		 			 			 		 	  What would be the impact on farmers total revenue?______________________________________ 	(6 marks) Is the equilibrium level of GDP necessarily an ideal economic situation?   (Use aggregate demand and aggregate supply curves to illustrate your answer.) 	 		 			 		 		 			 			 		 	  List three factors which might cause the aggregate demand curve to shift to the right:____________________________________________________________________________________________________________________________________________________________________________________ 	(6 marks) The following is the Consumer Price Index for Canada for the years 2009 to XXXXXXXXXXThe CPI for 2002 = XXXXXXXXXXCalculate the annual rate of inflation for 2009, 2010 and 2011. Your answer should be accurate to 2 decimal places.    	 		 			Date  			CPI 			Rate of Inflation 		 		 			January-01-09 			113.0  			2009 		 		 			January-01-10 			115.1  			2010 		 		 			January-01-11 			117.8  			2011 		 		 			January-01-12 			120.7  			 		 	     	 		 			 			 		 		 			 			 		 		 			 			 		 		 			 			 		 		 			 			 		 	   	(8 marks) Examine the following partial balance sheet for ABC Bank:  Assume the bank requires a 5% reserve ratio 	What are the current excess reserves of the bank?_________________ 	If ABC Bank decides to lend out the excess reserves, what is the potential increase in the money supply?_____________ 	Assume $20,000 is withdrawn from the bank, what are the excess reserves of the bank now?__________________ 	If ABC Bank decides to lend out the excess reserves, what is now the potential increase in the money supply?_____________     	(5 marks) What impact will an decrease in the money supply have on:     	Interest rates_____________________ 	Business investment____________________ 	Aggregate demand__________________ 	Employment in Canada_________________ 	Prices___________________     	(15 marks) Briefly answer the following questions using Microsoft Word: 	 		Your answers will reflect the correct use of grammar, spelling, and vocabulary and terms associated with the subject matter. 		Content will be relevant, accurate and concise. 	 	     	The Canadian government spends money on military equipment. What is the opportunity cost of this spending? 	Why are the services performed by volunteers not included in the calculation of GDP? Should the work of volunteers be recognized in the National Accounts? 	Why is RGDP (Real Gross Domestic Product) a better indicator of the amount of goods and services produced than GDP? 	In a recession, government should not undertake any additional expenditures. Comment on this statement. 	Will increases in government spending be sufficient to provide everybody with a job? In your answer consider the major types of unemployment: demand-deficient, frictional, seasonal, and structural.

Robert · Accepted Answer

Using Microsoft Word, answer the following questions
Assignment
Total marks: 60
1. (20 marks) Using demand and supply curves show the impact of the following: 
Make sure you label your axis, your supply and demand curves, as well as the movement of price (P to P1) and quantity (Q to Q1).
a. The impact of a price decrease of rice on the market for potatoes: 
Answer:
Rice is in way a substitute good to potatoes. So if price of rice decreases, demand for rice will increase while demand for potatoes will decrease, causing demand curve for potatoes to shift leftward (from DD to DD1). As a result, equilibrium price and equilibrium quantity for potatoes will fall. [Refer figure1 below]
Figure1:
Impact on price:  fall
Impact on quantity:  fall
b. The expectation of a price increase on the market for coffee:
Answer:
If there is expectation of price increase, current demand for coffee will increase at all levels of price and therefore demand curve for coffee will shift rightward (from DD to DD1). As a result, there will be increase in both equilibrium price as well equilibrium quantity for coffee. [Refer figure2]
Figure2:
Impact on price:  rise
Impact on quantity: rise
c. The impact of a decrease in the price of memory chips on the market for computers: 
Answer:
Memory chips are complementary goods to computers. So if price of memory chips falls, the demand for computers will increase, causing demand curve for computers to shift rightward (from DD to DD1). As a result, there will be increase in both equilibrium price as well equilibrium quantity for computers. [Refer figure3]
Figure3:
Impact on price: rise
Impact on quantity: rise
d. The impact of an increase in excise taxes on refrigerators on the market for refrigerators: 
Answer:
Due to increase in the excise taxes on refrigerators, there will be decline in the profitability of producer of refrigerators at the current level of price. So producers of refrigerators would now like to supply less at all levels of price, causing supply curve of refrigerators to shift leftward (from SS to SS2). As a result, equilibrium price of refrigerators will increase while equilibrium quantity of refrigerators will fall.  [Refer figure4]
Figure4:
Impact on price:  rise
Impact on quantity:  fall
e. The impact of the government imposing a price ceiling on apartment rents:
Answer:
Price ceiling on apartment rents defines the upper bound on rents that can be charged. In other words, it defines the maximum rent that can be charged. Such ceiling is applied when the equilibrium/current rent of apartments is very high. So under this scheme, maximum rent is set below the equilibrium rent. As shown in figure5 below, ceiled rent is Rc which is less than the equilibrium rent (R*).  We note that at this rent level (Rc), quantity supplied of apartments has fallen (from Q to Qs) whereas quantity demanded of apartments has increased (from Q to Qd). This means there will be shortage of apartments (Qd-Qs) at the ceiled rent rate.
Figure5:
Impact on rental price: fall
Impact on quantity supplied:  fall
Impact on quantity demanded:  increase
f. If the demand for many farm products is inelastic, why would a bad crop, that is, fewer crops harvested, be to the advantage of farmers? Use demand and supply curves to illustrate your answer.
Answer:
A bad crop is likely to increase the price of farm products.

Date	CPI	Rate of Inflation
January-01-09	113.0	2009
January-01-10	115.1	2010
January-01-11	117.8	2011
January-01-12	120.7

Assignment Total marks: 60 (20 marks) Using demand and supply curves show the impact of the following: Make sure you label your axis, your supply and demand curves, as well as the movement of price (P...

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