11. Supply and Demand - Application of Simultaneous Equations

(a) Find the equilibrium price and quantity in each of the following markets:

(i) Qd = 6 − 2p, Qs = 3 + p;

(ii) Qd = 10 – 5/2 p, Qs = 3 + p;

(iii) Qd = 1 − p, Qs = 3 + p. Comment on the situation in market (iii).

(b) What would be the effect of a purchase/sales tax of 1 cent per item in (ii) above, if p measures price in cents? Explain your answer.

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

Multiple Choice

• incentive problem under central planning.

• self-sufficiency dilemma under communism.

• resource overcommitment problem under communism.

• coordination problem under central planning.

Name three empires that controlled Mesopotamia between 900 BC and 500 BC

Compare the classical economic theory that was used prior to the Great Depression to the Keynesian theory used after the Great Depression.

what is the appropriate balance between government and freedom in American democracy?

Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, a shift in neither curve, or a shift in both curves. If a shift is caused, indicate which curve shifts, and in which direction it shifts. What happens to aggregate output and the price level in each case?

1] The price level changes.

2] Consumer confidence increases.

3] The supply of resources decreases.

4] The wage rate decreases.

is China a net exporter of carbon emissions (co2) why or why not?

Note: Answer needs to be a minimum of 270 words.

In practice do we have a progressive, proportional, or regressive personal income tax rate system in the US? (ensure the how's, why's, etc)

Consider the example below, how would you account for the revenue from a contract for HMM11 products? How would you account for the revenue from a contract for HMM12 products?

Early in the redesign of HMM12, Bills recognized that the decision for HBP to host the software would affect how revenues were recognized from sales of the new product. For HMM11, the client hosted the software on its servers and was responsible for all maintenance and operating costs. Although HBP offered to fix any software bugs, there was no contractual obligation to provide updates/point releases. As a result, the full value of any multi-year licensing contracts was recognized as revenue when the software was delivered.

If the client chose to have HMM11 software hosted on HBP’s server, the contract specified that the client would pay HBP an upfront licensing fee and a separate hosting fee (equivalent to about 10% of the licensing fee) at the time the contract was signed. In the majority of contracts, the client paid a nonrefundable licensing fee. Some clients negotiated a Termination for Convenience (TFC) clause. Since the underlying product was not updated and clients had the option of hosting the software on their systems or on HBP systems (incurring a separate hosting fee), HBP recorded the full value of the licensing fees as revenue at the beginning of the contract period. In contrast, hosting fees were recorded as deferred revenues and recognized as revenue ratably over the life of the contract (terms were 1, 2, or 3 years).

The new business model for HMM12 eliminated the option for clients to host HMM software and introduced an ongoing obligation for HBP. Clients would continue to pay an upfront licensing fee, but since only HBP could host the software there was no separate hosting fee. The license fee gave the client access to the software, the hosting, and any future improvement releases over the contract period. Accordingly, the contract was analogous to a subscription, rather than an outright sale.

For accounting purposes, HBP was required to record the upfront license fee as deferred revenue on its balance sheet. At the end of each accounting period, it would recognize a portion of the deferred revenue as earned revenue in the income statement. For example, if a client paid $360,000 for a 3-year (i.e., 36-month) license period, at the time of the contract HBP would record the $360,000 as deferred revenue (a liability) and cash (an asset) on the balance sheet. At the end of the first quarter (i.e., 3- months), HBP would recognize $30,000 (i.e., $360,000 divided by 36 months times 3 months) as earned revenue with a corresponding $30,000 subtracted from the deferred revenue liability.

Question 2 [25 Marks]

As the lead advisor to the parliamentary economic planning cluster, write a technical brief advising policymakers on four approaches that the government can adopt in response to inefficiencies caused by monopolies within an economy. Discuss the potential problems associated with each policy response. Note: Your answer must be supported by using relevant examples from an economy of your choice and a brief explanation of the nature of the sector in which the monopoly operates.

1.

Suppose Betty likes to consume cheese and biscuits, consuming 3 ounces of cheese(C) per every 2 biscuits(B). What is the utility function that best illustrates Betty’s preferences? a) U(C, B) = min{ C 2 , B 3 } b) U(C, B) = min{ 2C 3 , B} c) U(C, B) = min{C, B 2 } d) U(C, B) = min{ C 2 , B}

2.

A consumer buys food (F) and shelter (S). If the consumer’s income doubles and there is no change in the prices of F or S, the marginal rate of transformation of F for S will a) double. b) decrease by half. c) stay the same. d) increase, but not double