Question

Answer each question with True orFalse

Draw a supply and demand diagram to explain your answer:

d)- Poor countries in Africa do not benefit from trade with more advanced nations because they do not have the technological capabilities of large multinational corporation

g)- Reducing payroll tax benefits workers and employers equally.

Answer 1

;-The concept ‘Demand’ refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a given period of time. It is to be noted that demand, in Economics, is something more than the desire to purchase, though desire is one element of it. A beggar, for instance, may desire food, but due to lack of means to purchase it, his demand is not effective. Thus, effective demand for a thing depends on (i) desire (ii) means to purchase and (iii) willingness to use those means for that purchase. Unless desire is backed by purchasing power or ability to pay, and willingness to pay, it does not constitute demand. Effective demand alone would gure in economic analysis and business decisions.Two things are to be noted about the quantity demanded. 1. The quantity demanded is always expressed at a given price. At different prices different quantities of a commodity are generally demanded.2. The quantity demanded is a ow. We are concerned not with a single isolated purchase, but with a continuous ow of purchases and we must therefore express demand as ‘so much per period of time’ i.e., one thousand dozens of oranges per day, seven thousand dozens of oranges per week and so on.

“By demand, we mean the various quantities of a given commodity or service which consumers would buy in one market during a given period of time, at various prices, or at various incomes, or at various prices of related goods”.

:-The concept ‘Suppy’ refers to quantity supplied of a good with one or more related variables which have an inuence on the supply of the good. Normally, supply is related with price but it can be related with the type of technology used, scale of operations etc

The law of supply can be stated as: Other things remaining constant, the quantity of a good produced and offered for sale will increase as the price of the good rises and decrease as the price falls.

The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the produc

d)- True..) Africa has been struggling to be relevant in the world market. however, its global share of merchandise trade has reduce over the decades.

Africa's economy was diverse, driven by extensive trade routes that developed between cities and kingdoms. Some trade routes were overland, some involved navigating rivers, still others developed around port cities. Large African empires became wealthy due to their trade networks,

g)- True..) payroll tax benefits workers and employers equally. The two main federal payroll taxes levied on wages are known as Federal Insurance Contributions Act (FICA) taxes. Employees and employers both pay FICA taxes: employees usually have them withheld from their paychecks, while employers pay them in addition to any other taxes they owe. However, most economists agree that employees bear the true cost of employer payroll taxes in the form of lower wages. The two FICA taxes are:

• Social Security tax, also known as the Old-Age, Survivors, and Disability Insurance (OASDI) tax. It is levied at a rate of 12.4 percent (split evenly between employees and employers) up to a maximum amount of an employee’s wages ($137,700 in calendar year 2020). This wage cap is adjusted annually to take account of increases in average wages. The revenues go toward funding Social Security, which pays benefits to retirees, persons with disabilities, and survivors of deceased workers.
• Medicare tax, also known as the Medicare Hospital Insurance (HI) tax. It is levied at a rate of 2.9 percent of wages (split evenly between employees and employers); unlike the Social Security tax, there is no wage cap. Married filers’ earnings over $250,000 (and singles’ earnings over $200,000) are taxed at an additional 0.9 percent, for a total of 3.8 percent on this income. Revenues from the Medicare tax support the hospital insurance portion of Medicare.