a. In words, interpret the income elasticity of demand for cereal being equal to 1.5. (Hint: your answer should include a %).
b. For the utility function U(x,y) = 8ln(x)+2y, solve for individual demand for goods x and y.
c. Using your result from Question B, assume Px = 1 and Py = 1. What is the income elasticity of demand for good x?
d. The demand for good x is given by x∗ = 60−4Px +2M +Py, where Px is the price of good x, Py is the price of good y, and M is income. Find the income elasticity of demand when Px = 20, Py = 20, and M = 100. Is x a normal or inferior good? Explain.
In: Economics
Given the following information:
Settlement date: 13 August 2001
Treasury bond maturity date: 25/11/2010
Treasury bond coupon rate: 6.25 percent, paid semiannually
Treasury bond quoted price: 110.20
Futures quoted price: 115.94
Futures expiry date: 28/09/2001
Repo rate: 4.9 percent
Assume that the bond has a $100 million face value, and futures contract has a $1 million
nominal amount.
a) What is the implied repo rate? Interpret your finding.
b) What is cash and carry arbitrage trade? Explain the process.
c) Is there a cash-and-carry arbitrage based on the information above?
d) What is the dollar amount of profit or loss?
In: Finance
Today is 1 July 2018. Matt is 30 years old today. Matt has a portfolio which consists of three Treasury bonds (henceforth referred to as bond A, bond B and bond C). There are 200 units of bond A, 300 units of bond B and 500 units of bond C. Bond C is a Treasury bond which matures on 1 January 2021. One unit of bond C has a coupon rate of j2 = 3.35% p.a. and a face value of $100. Matt purchased this Treasury bond on 1 January 2018. The purchase yield rate was j2 = 3.4% p.a. and the purchase price of one unit of bond C is $99.86. Find the sale price of one unit of bond C
In: Finance
Assume that Harry Ellis produces table lamps in the perfectly competitive table lamp market.
|
OUTPUT PER WEEK |
TOTAL COSTS |
AFC |
AVC |
ATC |
MC |
|
0 |
$100 |
||||
|
1 |
150 |
||||
|
2 |
175 |
||||
|
3 |
190 |
||||
|
4 |
210 |
||||
|
5 |
240 |
||||
|
6 |
280 |
||||
|
7 |
330 |
||||
|
8 |
390 |
||||
|
9 |
460 |
||||
|
10 |
540 |
4.4.a Fill in the missing values in the above table.
4.4.b Suppose the equilibrium price in the table lamp market is $50. How many table lamps should Harry produce, and how much profit will he make?
4.4.c If next week the equilibrium price of table lamps drops to $30, should Harry shut down? Explain.
In: Economics
(a)
Suppose our consumer has two possible consumption bundles, one with 1 unit of
clothes and 5 units of food, the second with 3 units of clothes and 4 units of food. For
which is the MRS of clothes for food the highest?
(b)
For the example in (a), what property of indifference curves tells us which will have the
highest MRS of clothes for food?
(c)
Suppose your income is $100. The price of food is $15, and the price of clothes is $20.
Draw your budget constraint labeling the two endpoints.
(d)
Suppose that you income in question 3 rises to $150, draw your new budget constraint.
(e)
Draw the highest indifference curve obtainable in questions 3 and 4. What principle are
you illustrating?
In: Economics
The following table shows the costs that a firm faces in a perfect competitive market:
|
Output |
Fixed Cost |
Variable Cost |
Total Cost |
Average Total Cost |
Marginal Cost |
|
0 |
0 |
||||
|
1 |
40 |
||||
|
2 |
100 |
||||
|
3 |
170 |
||||
|
4 |
250 |
||||
|
5 |
360 |
||||
|
6 |
580 |
||||
|
7 |
920 |
a. Taking into account that the firm has a fixed cost of $200, complete the table. (20 points)
b. If the market price is $340, what is the level of output that the firm should produce in order to maximize profit? Calculate the maximum profit. (5 points)
c. If the market price falls to $110, how much the firm should produce, how much are the profits and what should the firm do in the long run? (5 points)
In: Economics
An individual consumer has an income of $100 to spend on two goods, which are food and clothes. When each of these two goods has a price of $2 per unit, the individual spends equal amounts on food and clothes.
(a) For the above set of income and prices, illustrate the consumer's equilibrium diagrammatically, showing the budget line and indifference curves.
(b) If the government then provides the individual with a subsidy of $1 for every unit of food purchased, how many units of each good will be bought, assuming that the price elasticity of demand for food is unity?
(c) If the government next abolishes this food subsidy, but simultaneously gives the consumer $50 to spend freely on the two goods in any way desired, what happens to the individual's welfare [compared to part (b) above]?
In: Economics
4.) If Sean's income increases from $10,000 to $50,000, then he buys 100 MARTA tokens rather than his previous 200 MARTA tokens per year.
A. What's Sean's arc income elasticity of demand for MARTA tokens? __________.
B. Are MARTA tokens inferior or normal good for Sean? _____________________.
5) As the price of a student parking space increases from $2.50 to $3.50, the quantity supplied (number) of student parking spaces increases from 1050 to 1150.
A. What is the arc elasticity of supply of student parking spaces over this portion of the supply curve of student daily parking spaces? _________________.
B. Is the supply curve for daily student parking spaces elastic, unit elastic, or inelastic over the range of this price change? _________________________ .
In: Economics
4.) If Sean's income increases from $10,000 to $50,000, then he buys 100 MARTA tokens rather than his previous 200 MARTA tokens per year.
A. What's Sean's arc income elasticity of demand for MARTA tokens? __________.
B. Are MARTA tokens inferior or normal good for Sean? _____________________.
5) As the price of a student parking space increases from $2.50 to $3.50, the quantity supplied (number) of student parking spaces increases from 1050 to 1150.
A. What is the arc elasticity of supply of student parking spaces over this portion of the supply curve of student daily parking spaces? _________________.
B. Is the supply curve for daily student parking spaces elastic, unit elastic, or inelastic over the range of this price change? _________________________ .
In: Economics
The price of DVDs (D) is $20 and the Price of CDs (C) is $10. Phillip has a budget of $100 to spend on goods.
A). Given the above prices and income, Write and equation for Philips budget line and draw his budget line on a graph with CDs on the horizontal axis. Also calculate the slope of his budget line.
B). List all the market bundles(baskets) of DVDs and CDs that he could choose. For this part of the question, assume that he cannot purchase fractional units.
C). If philips utility function is U(D,C)=C D^2, which bundle is most preffered?
D). If phillips utility function is U(D,C)= C^2 D, which bundle is most preffered?
In: Economics