Economics Homework

profileWaqas Ahmed

 

1.1 Effect of Weather on Prices.

Suppose a freeze in Florida wipes out 20 percent of the orange crop. How will this affect the equilibrium price and quantity of Florida oranges? That is, will price and/or quantity increase, decrease, or remain the same?

 

1.2 Immigration Control and Prices.

Consider the market for raspberries. Suppose a new law outlaws the use of foreign farm workers on raspberry farms, and the wages paid to farm workers increase as a result. Predict the effects of the higher wage on the equilibrium price and quantity of raspberries. 

 

1.3 Market Effects of a Tax.

Consider the market for fish. Use a demand and supply graph to predict the effect of a tax paid by fish producers of $ 1 per pound of fish. Use a demand and supply graph to predict the market effect of the tax on the equilibrium price and the equilibrium quantity of fish.

 

1.4 Innovation and the Price of Mobile Phones.

Suppose that the initial price of mobile phone is $100 and that the initial quantity demanded is 500 phones per day. Suppose a new technology decreases the cost of producing mobile phones. Predict the effect of this on the equilibrium price and quantity of the mobile phone.

 

 

 

PART II: MARKET FAILURE

 

2.1       What is the meaning of market failure? 

 

2.2.      List at least five conditions that may result in market failure. 

 

2.3       What is the meaning of externality?

 

2.4       Give example of positive and negative externality, and explain in each case how it         results in market failure. 

 

2.5       If there is a negative externality, explain 

 

a.     Possible private policy action to cure it, and

b.     Possible public policy action to cure it.

 

 

PART III: NATIONAL INCOME ACCOUNTING

 

3.1       Why are national income and products account valuable? 

 

3.2       What are the components of the major categories in each of the two major ways         used in measuring national income and product account? 

 

3.3       What is the difference between nominal GDP and real GDP?  

 

 

 

 

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