Question 1 The amazingly great economy of Brockway, is comprised of two types of firms: the...

Question 1

The amazingly great economy of Brockway, is comprised of two types of firms: the first type is setting price first then making goods. There are 50 of those firms. For the second type, they are setting price at the last opportunity, there are 35 of those types of firms.

If potential output is 500, and the expected price level is 102. the alpha parameter is 1.

a.[6 points] Using the sticky price model, find the Aggregate supply curve for Brockway.

b.[4 points] Plot both short run and long run aggregate supply curves. And identify the output given the price level of 102.

c.[5 points] If 20 firms would change pricing strategy from first to last (instead of 50 there are 30 of first). Provide the new short run curve and plot it in the same graph in b).

Solutions

Expert Solution

Rahul Sunny answered 1 month ago

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