Question

Draw a hypothetical demand and supply curves for egg cups in Canada, and then graph and explain the following events and how they affect the equilibrium price and quantity of egg cups in Canada.

1. A successful advertising campaign by egg cup producers.

2. Technological improvements in the production of egg cups.

3. An increase in the price of eggs a compliment in consumption.

4. An increase in the price of bird feed the main input in egg production.

5. An increase in the demand for waffles a substitute in consumption of eggs.

1. Unemployment  (show all work)

Suppose that country a population of 120 made up of a labour force of 100 and 20 children under the age of 15,

1. What is the participation rate.

Eight members of the labour force are unemployed

2. What is the unemployment rate?

Of the eight unemployed 2 worked in a factory that produced pies this factor has closed down and expected to open up after the pandemic.

3. Describe what type of unemployment this is and why.

One of the eight is a sky instructor and has been laid off for the summer

4. Describe what type of unemployment this is and why.

One of the unemployed cannot find a job and gives up looking

5. What is the new unemployment rate

2. Inflation (show all work)  

Name the two measurements of inflation discussed in class

            1)

            2)

Using 2012 as the base year (=100) calculate the inflation rate for 2013

Year	Slices of Pizza	Price per Slice	Cans of Pepsi	Price per Can
2012	40	10	10	20
2013	60	12	20	24

What does currency depreciation mean?

Who is the only legal issuer of bank notes and coins in Canada?

A responsible government believes that the inflation rate is out of control, what fiscal policies could they enact?

4)  Economic Growth

	2017		2018
Product	Quantity	Price	Quantity	Price
Backpacks	100	$10	120	$12
Books	50	$15	40	$20

Using 2017 as a base year, calculate;

1) The GDP deflator

2) Nominal Economic growth

3) Real economic growth

4) Give reasons why Real GDP per capita may overstate the well-being of a countries inhabitants?

            

            

5)   MATCHING

Match the terms on the right to the ones on the left by placing the appropriate CAPITAL letter on the space provided.  All the phrases are designed to fit; some may fit more than once.  In any case, provide only one answer for each term.  Illegible answers will be marked as wrong.

1. _____  easy money policy                            A.         increases competition

2. _____   M2+                                               B.         imports become cheaper  

3. _____  C $ depreciates                                C.         expansionary fiscal policy

4. _____  reduction in Gov. spending               D.         reduces competition

5. _____  non-tariff barrier                              E.         used to reduce inflationary pressures

6. _____  C $ appreciates                                F.         includes notice deposits of banks

7. _____  free trade                                        G.         tight fiscal policy

8. _____  tax reduction                                   H.         Exports become cheaper

9. _____   M 1                                                I.          interest rates fall

10. ____  tight money policy                             J.          currency plus demand deposits in banks

Answer 1

A succesful advertising campaign for egg cup producers will increase the demand for egg cups. This causes demand to shift right from D1 to D2 and hence equilibrium price and quantity increases.

A technological improvement in the production of egg cups will allow the production of more egg cups for a given price. Hence supply will increase and shift right from S1 to S2. This causes equilibrium price to fall and quantity to increase.

An increase in price of eggs will reduce the quantity demanded for egg. As less eggs are demanded, less egg cups are required and hence demand for egg cups decreases from D1 to D2. This causes equilibrium price and quantity to decrease.

An increase in price of bird feed increases the input cost of egg production. This causes the supply of eggs to decrease. This raises the price of egg. This decreases quantity of eggs at equilibrium and hence less egg cups will be demanded. So demand for egg cups decreases from D1 to D2 and reduces equilibrium price and quantity. Note that egg cups and eggs are complement in consumption. Increase in bird feed prices does not effect input costs of egg cups.

An increase in demand for waffles will decrease demand for eggs. This will cause the demand for the complementary good-egg cups to decrease. Hence demand for egg cups shift from D1 to D2 and decreases equilibrium price and quantity.

The vertical axis in the diagram is price of egg cups P and horizontal axis is quantity of egg cups Q. The figures are drawn and posted in the order of the questions.