ECO403 Assignment No. 1 Solution

 Solution 1

Nominal GDP	Real GDP	GDP reflector	Inflation rate
92575	92575	100	---
94115	82355	114.3	14.3%
145800	112450	129.7	15.4%

Formulas

For calculation nominal gdp Multiply Ps & Qs from same year llike 200*140+315*205=92575

Etc etc

Asy he bqi b calculate krni ha

Or real gdp me prices 1^st wali use hongi or quantities sub ki baribari lagai jaengy

Llike 200*14+315*205=92575

200*70+315*217=82355

200*200+315*230=112450

GDP Deflator = Nominal GDP /Real GDP *100

Or inflation rate 1^st --, or 2^nd 114.3-100=14.3%

3^rd 129.7-114.3=15.4%

Solution 2

labor force = employment * unemployment

= 164.5+8= 172.5 million

number of people not in labor force= not employed= 8 million

Labor-Force Participation Rate = Labor Force/Adult Population x 100

=172.5/329.8*100 = 52.30 million

Unemployment Rate = Number of Unemployed /Labor Force*100

=8 /17505*100= 4.64 million

ECO402 Assignment Solution

Question 1

Part A

Qd= 850-25P

Qs= 500+45p

To find equilibrium price

Qd=Qs

850-25p=500+45p

After solving the equation we have the value of P, which is equilibrium price.

Then put he value of p in any one of the equation of quantity then we have the equilibrium quantity Q.

Part B

For calculating elasticity of demand we have the formula…

Elasticity of demand = Ed = dQ/dP / Q/P

Derivative should b taken of demand function (Qd= 850-25P) with the respect to P

Ed is negative. 

For calculating elasticity of supply we have the formula…

Elasticity of demand = Es = dQ/dP / Q/P

Derivative should b taken of supply function (Qs= 500+45p) with the respect to P

Es is positive.

Question 2

q	TU	MU
0 1 2 3 4 5 5 7 8	0 10 18 24 28 30 30 28 24	--

Mu= dTU/dQ

;;;;;;;;;;;;;;;;;

QNO1

A:

QD=QS

QD=850-25P
QS=500+45P
WE KNOW QD=QS
SO
850-25P=500+45P
850-500=45P-25P
350=20P
P=350/20
=17.5
QS=500+45P
QS=500+45(17.5)
QS=500+787.5
QS=1287.5
AS WE KNOW QS=QD FOR EQULIBRIUM

SO it will be at 1287.5
............

Qd=Qs
850-25p=500+45p
850-500=45p+25p
350=70p
p=350/70
p=5 ( equilibrium price)
Now,
Putting the value of P in eq 1, we will get the equilibrium quantity,
Q=500+45(5)
Q=500+225
Q=725 per bushel

;;;;;;;;;;;;;;;;;;;;;

Eco401 Assignment No. 1 - Solution

Question:
Suppose the market demand and market supply for coffee is given by the following equations:
Qd = 850 – 15P
Qs = 400 + 30P
A. Find quantity demanded and quantity supplied when the price of coffee is
Rs. 8. Is there a surplus or shortage in the production of coffee? What
should happen to the price of coffee?
B. Find the equilibrium price for coffee by using given demand and supply
equations.
C. Prove that the price found in part (B) is an equilibrium price.
D. Show the equilibrium condition in coffee market graphically.
Marks: A = 6(4+1+1), B = 2, C = 3, D = 4 



A

(1)

P=8

Q(d)=850-15(p)

Q(s)=400+30(p)

Put price in q(d) and q(s)

Q(d) Q(s)

=850-15(p) =400+30(P)

=850-15(8) =400+30(8)

=850-120 =400+240

=730 =640

(2)

shortage production because Q(d) is high and Q(s)low is low eight is not equilibrium price

(3) Shortage will increase price



(B)

Equilibrium price

Q(d)=Q(s)

850-15(p)=400+30(p)

45p=450

p=450/45

p=10

Equilibrium price =10

Here demand and supply is equal



(C)

Equilibrium proved

Q(d)=Q(s)

850-15(p)=400+30(p)

850-15(10)=400+30(10)

850-150=400+300

700=700

(D)

Graphical 

...............


A. Calculation of quantity demand and quantity supply

The given equations are
1. Q (d) =850-15(p)
2. Q(s) =400+30(p)
As we know that the given price of coffee is P = 8 Rs.
So, to find out the quantity demand and quantity supply put the value of price P in above equations.
So, Put price in q (d) and q(s)

Q (d) =850-15(p) Q(s) =400+30(p)

Q (d) =850-15(8) Q(s) =400+30(8)
Q (d) =850-120 Q(s) =400+240
Q (d) =730 Q (s) =640

(a) From the above results, we have to know that this is a
Shortage production of coffee because Q (d) is high and Q(s) is low so, eight (8) is not equilibrium price

(b) If there will be a shortage of production that is, Q (d) will be high and Q (s) will be low, then this shortage of that production will increase price.

B. Calculation of equilibrium price by using above equations

As we know that if Q (d) will be equal to Q(s) the price will be equilibrium
So,

Q (d) =Q(s)
850-15(p) =400+30(p)
850-400=30(p) +15(p)
450=45(p)
p=450/45
p=10 Rs.

So, Equilibrium price =10
Here demand and supply is equal

C. Equilibrium proved

By putting the value of equilibrium price in Q (d) and Q (s) we can prove it.
So,
Q (d) =Q(s)
850-15(p) =400+30(p)
850-15(10) =400+30(10)
850-150=400+300
700=700

Thus proved if p=10 then Q (d) and Q (s) will be equal




D. The graph with the help of table.


Price Quality demand Quality supply
9 715 670
10 700 700
11 685 730
......................

QUESTION NO 1 (A)

(1)
P=8
Q(d)=850-15(p)
Q(s)=400+30(p)
Put price in q(d) and q(s)
Q(d) Q(s)
=850-15(p) =400+30(P)
=850-15(8) =400+30(8)
=850-120 =400+240
=730 =640
(2)
shortage production because Q(d) is high and Q(s)low is low eight is not equilibrium price
(3) Shortage will increase price

(B)
Equilibrium price
Q(d)=Q(s)
850-15(p)=400+30(p)
45p=450
p=450/45
p=10
Equilibrium price =10
Here demand and supply is equal

(C)
Equilibrium proved
Q(d)=Q(s)
850-15(p)=400+30(p)
850-15(10)=400+30(10)
850-150=400+300
700=700

(D)

Graphical
Price Quality demand Quality supply
9 730 640
10 700 700
11 685 730

Eco401 Assginment No. 1

Semester “Fall 2010”
“Economics (ECO401)”
Assignment No.01 Marks: 15

Question:

Suppose the market demand and market supply for coffee is given by the following equations:

Qd = 850 – 15P
Qs = 400 + 30P

A. Find quantity demanded and quantity supplied when the price of coffee is Rs. 8. Is there a surplus or shortage in the production of coffee? What should happen to the price of coffee?

B. Find the equilibrium price for coffee by using given demand and supply equations.

C. Prove that the price found in part (B) is an equilibrium price.

D. Show the equilibrium condition in coffee market graphically.

Marks: A = 6(4+1+1), B = 2, C = 3, D = 4

Important Note:
􀂾 Calculate to the point where calculation is being required. NO need to write irrelevant material or extra interpretation.
􀂾 Draw equilibrium condition in coffee market by yourself. Do NOT copy from any source. NO need to write irrelevant material.
􀂾 Graphs are very important in Economics course. This assignment will enhance your skill of drawing graphs. A complete procedure of “How to draw graphs in MS-Word” is uploaded on announcement page of LMS. Get help from that uploaded file to solve part D of this assignment.
 

Important Tips:
1. This Assignment can be best attempted from the knowledge acquired after watching video lecture no. 1 to lecture no 10 and reading handouts as well as recommended text book.
2. Video lectures can be downloaded for free from www.youtube.com/vu.
 

Schedule
Opening Date and Time October 26, 2010 At 12:01 A.M. (Mid-Night)
Due Date and Time November 01, 2010 At 11:59 P.M. (Mid-Night)

Note: Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.
 

Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.
Deadline:
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assignment will be accepted through e-mail once the solution has been
uploaded by the instructor.
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Solution guidelines:
• Use APA style for referencing and citation. For guidance search “APA
reference style” in Google and read various website containing
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http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html
• Every student will work individually and has to write in the form of an
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for irrelevant material.
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Rules for Marking
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Eco402 Assignment No. 1

Assignment 01 ECO402

(Fall 2010)
Total Marks 20
Question 01:
Suppose for market of wheat the supply and demand equations in year
2010 are:
Q
d= 850 – 25P 
Q
s=500 + 45P 
A. Calculate the equilibrium price and equilibrium quantity of wheat for
2010.
B. Calculate the elasticity of demand and elasticity of supply; what do
you conclude from these answers whether these are elastic or
inelastic.

(Marks = 5+5)

Important Note:

•
Just calculate to the point in each part.NOneed to write irrelevant 
material or extra interpretation.
Question 02:
The following table shows the quantity of mangoes consumed and total
utility derived from consuming these mangoes.
Quantity of
mangoes
Consumed
Total Utility
0 0
1 10
2 18
3 24
4 28
5 30
6 30
7 28
8 24
A. From the information given in above table, calculate the marginal
utility at each point.
B. Draw Marginal Utility curve.

(7+3)

Important Note:

•
Draw graph of marginal utility by yourself. DoNOTcopy from any source. 
NO
need to write irrelevant material. 
•
Graphs are very important in Economics course. This assignment will 
enhance your skill of drawing graphs. A complete procedure of
“How to 
draw graphs in MS-Word”
is uploaded on announcement page of LMS. 
Get help from that uploaded file to solve this assignment.

Eco401 Assignment No. 1 Announcement

Semester “Fall 2010”
“Economics (ECO401)”

This is to inform that Assignment # 01 (covering video lecture no. 1 to lecture no 10)

will be uploaded on VULMS according to the following schedule

Schedule

Opening Date and Time
October 26, 2010 At 12:01 A.M. (Mid-Night)

Closing Date and Time
November 01, 2010 At 11:59 P.M. (Mid-Night)

Eco401 solved past/old papers GURU

Eco401 solved past old Papers GURU.pdf

Eco401 all MCQs combine (VUsolutions GURU Eco401)

Eco401 all MCQs combine (VUsolutions GURU Eco401), Economics Multiple Choice Question with answers, MCQs Eco401,

ECO403 - Macroeconomics GDB solution

What measures have been promised by the Finance Minister to cope up with the problem of inflation?

Keeping in view the Federal Budget of Pakistan 2010-11, what is the inflation 
rate of Pakistan? What measures have been promised by the Finance Minister 
to cope up with the problem of inflation? 
Note: 
Your answer should be based on Federal budget Of Pakistan 2010-2011.Give 
your answer in just 3 lines not more then that. 
Solution 
12.68% is Pakistan’s inflation rate. Finance minister promised to take certain actions to 
improve inflation rate.like 
• Reduction in custom duty will have positive impact on inflation. 
• Government expenditure reduction

......................

“Consider IS curve and LM curve in an open economy as explained in a Mundell Flemming model. By having expansionary fiscal policy, there is an increase in government purchase and the IS curve shifts towards right. There is no change in LM curve and it remains vertical. Due to the shift of IS curve, the interest rate and income level remains same but the exchange rate varies”.

Required:

Keeping in view of open economy in the above scenario, if the government want to use expansionary fiscal policy to increase the income level then it cannot do that, why?

..........

If the govt. want to use expansionary fiscal policy to increase the income level then it cannot do that, because there is no change in the interest rate it is given and the LM is vertical LM curve, if use expansionary fiscal policy only the exchange rate become high and the income level remains fixed

.......

so simple;
exchange rates increases and has no effect on income because it is fixed in an open economy of exploratory fiscal plicy.

.........

ECO403 Current Quiz

Question # 1 of 15 ( Start time: 11:14:04 AM )  Total Marks: 1 

In a small open economy with a floating exchange rate, fiscal policy will be ineffective because: 

Select correct option: 

 Monetary policy will completely offset it.

 The exchange rate will remain constant.

 A fall in net exports will offset any increases in government purchases or consumption.

 The exchange rate will rise by the same amount as the interest rate.

    

Quiz Start Time: 11:14 AM  Time Left  86

sec(s)   

Question # 2 of 15 ( Start time: 11:15:19 AM )  Total Marks: 1 

Real interest rates are the: 

Select correct option: 

 Nominal interest rates plus the inflation rate.

 Interest rates quoted in the market.

 Interest rates quoted in the market minus the inflation rate.

 Interest rates quoted in the market plus the expected inflation rate.

    

Quiz Start Time: 11:14 AM  Time Left  87

sec(s)   

Question # 3 of 15 ( Start time: 11:16:29 AM )  Total Marks: 1 

The idea that government spending causes a reduction in private investment is called: 

Select correct option: 

 Fiscal drag. 

 Crowding-out.

 Investment blight.

 Accelerator effect.

Quiz Start Time: 11:14 AM  Time Left  87

sec(s)   

Question # 4 of 15 ( Start time: 11:17:43 AM )  Total Marks: 1 

In the steady state for the Solow model of economic growth with depreciation (ð), positive labor force growth (n) and technological change (a), we would expect Y/L to grow: 

Select correct option: 

 At the rate (a + n + ð). 

 At the rate (a + n - ð). 

 At the rate (a + n).

 At the rate a.

Quiz Start Time: 11:14 AM  Time Left  87

sec(s)   

Question # 5 of 15 ( Start time: 11:19:09 AM )  Total Marks: 1 

If people suddenly wish to hold more money at each interest rate: 

Select correct option: 

 The money demand curve will shift to the right.

 The LM curve will shift upward (to the left).

 Real income will fall.

 All of the given options.

Quiz Start Time: 11:14 AM  Time Left  84

sec(s)   

Question # 6 of 15 ( Start time: 11:19:47 AM )  Total Marks: 1 

The relative price of domestic goods in terms of foreign goods is known as: 

Select correct option: 

 Real exchange rate.

 Nominal exchange rate.

 Discount rate.

 Inflation rate.

Quiz Start Time: 11:14 AM  Time Left  87

sec(s)   

Question # 7 of 15 ( Start time: 11:20:08 AM )  Total Marks: 1 

An asset that is included in M3 but not in M2 is: 

Select correct option: 

 Currency.

 Checkable deposits.

 Small-denomination certificates of deposit.

 Large-denomination certificates of deposit.

Quiz Start Time: 11:14 AM  Time Left  87

sec(s)   

Question # 8 of 15 ( Start time: 11:20:53 AM )  Total Marks: 1 

If labor productivity per week is 200 units and there are 5 employees what is the total output? 

Select correct option: 

 40 units.

 95 units.

 1000 units.

 200 units.

Quiz Start Time: 11:14 AM  Time Left  86

sec(s)   

Question # 9 of 15 ( Start time: 11:21:31 AM )  Total Marks: 1 

Which of the following statements about net exports is correct? 

Select correct option: 

 The term C + I + G understate domestic production of goods and services because it leaves out exports, which must be subtracted out of GDP to obtain the correct figure.

 The term C + I + G overstates domestic production of goods and services because it contains imports, which must be subtracted out of GDP to obtain the correct figure.

 The difference between exports and imports is negative when the country is a net exporter.

 Before 1976, the United States was generally a net importer. Only after 1976, exports began to exceed imports.

Quiz Start Time: 11:14 AM  Time Left  86

sec(s)   

Question # 10 of 15 ( Start time: 11:22:48 AM )  Total Marks: 1 

Stock market boom or crash is an example of which of the following? 

Select correct option: 

 IS Shock

 LM Shock

 Demand Shock

 Supply Shock 

    

 Quiz Start Time: 11:14 AM  Time Left  87

sec(s)   

Question # 11 of 15 ( Start time: 11:23:35 AM )  Total Marks: 1 

If State Bank of Pakistan wishes to pursue a “tight” monetary policy it would: 

Select correct option: 

 Increase the minimum reserve asset ratio.

 Buy government securities on the open market.

 Lower interest rates.

 Sell government securities on the open market.

Quiz Start Time: 11:14 AM  Time Left  87

sec(s)   

Question # 12 of 15 ( Start time: 11:24:23 AM )  Total Marks: 1 

Which plays the most important role in increasing the rate of growth in real GDP per capita over time? 

Select correct option: 

 Increases in labor productivity

 Increases in the money supply

 Decreases in the level of inflation

 Increases in the real rate of interest

Quiz Start Time: 11:14 AM  Time Left  72

sec(s)   

Question # 13 of 15 ( Start time: 11:25:23 AM )  Total Marks: 1 

Which of the following is the closest definition of the term "investment"? 

Select correct option: 

 Investment is the purchase of financial assets, such as stocks and bonds

 Investment is the value of newly produced capital goods

 Investment is the purchase of goods for present consumption

 Investment is the accumulation of previous capital

    

Quiz Start Time: 11:14 AM  Time Left  85

sec(s)   

Question # 14 of 15 ( Start time: 11:26:50 AM )  Total Marks: 1 

Human wants are: 

Select correct option: 

 Always fixed.

 Limited.

 Unlimited. 

 Likely to decrease over time.

Quiz Start Time: 11:14 AM  Time Left  88

sec(s)   

Question # 15 of 15 ( Start time: 11:27:04 AM )  Total Marks: 1 

A common misperception about inflation is that it reduces real wages; this is: 

Select correct option: 

 True only in the short run.

 True only in the Long run.

 True only in Command economies.

 None of the given options.

    

Quiz Start Time: 12:29 PM  Time Left  87

sec(s)   

Question # 1 of 15 ( Start time: 12:29:15 PM )  Total Marks: 1 

If the U.S. real exchange rate decreases, U.S. ---------------- will fall and U.S. ----------------- will rise. 

Select correct option: 

 Exports; income 

 Exports; imports

 Income; imports 

 Imports; exports

    

Quiz Start Time: 12:29 PM  Time Left  88

sec(s)   

Question # 2 of 15 ( Start time: 12:29:42 PM )  Total Marks: 1 

In a macroeconomic model without foreign trade or government spending, aggregate demand is the sum of: 

Select correct option: 

 Personal saving and private investment.

 Personal saving and personal consumption.

 Personal consumption and personal income.

 Personal consumption and private investment.

    

Quiz Start Time: 12:29 PM  Time Left  86

sec(s)   

Question # 3 of 15 ( Start time: 12:31:08 PM )  Total Marks: 1 

The major difficulty in measuring economic growth in underdeveloped countries is: 

Select correct option: 

 Lack of skilled manpower.

 Lack of supply of empirical data.

 Preoccupation with other more important problems.

 All of the given options.

    

Quiz Start Time: 12:29 PM  Time Left  87

sec(s)   

Question # 4 of 15 ( Start time: 12:31:53 PM )  Total Marks: 1 

Which of the following is the best measure of the economic cost of higher unemployment? 

Select correct option: 

 The loss of potential exports for the economy.

 The loss of tax revenue.

 The increase in social security benefits paid by the government.

 The output of goods and services the unemployed workers could have produced

    

Quiz Start Time: 12:29 PM  Time Left  86

sec(s)   

Question # 5 of 15 ( Start time: 12:33:18 PM )  Total Marks: 1 

An increase of $1 in government purchases will: 

Select correct option: 

 Shift the planned expenditure curve upward by $1.

 Shift the IS curve to the right by $1/ (1 - MPC).

 Not shift the LM curve.

 All of the given options.

    

Quiz Start Time: 12:29 PM  Time Left  87

sec(s)   

Question # 6 of 15 ( Start time: 12:34:29 PM )  Total Marks: 1 

Inflation resulting from demand shocks is known as: 

Select correct option: 

 Demand pull inflation.

 Cost push inflation.

 Expected inflation.

 Food inflation.

    

Quiz Start Time: 12:29 PM  Time Left  86

sec(s)   

Question # 7 of 15 ( Start time: 12:37:49 PM )  Total Marks: 1 

Which of the following equations is correct? 

Select correct option: 

 Nominal interest rate = real interest rate - inflation

 Real interest rate = nominal interest rate + inflation

 Real interest rate = nominal interest rate × inflation

 Real interest rate = nominal interest rate - inflation

    

Quiz Start Time: 12:29 PM  Time Left  88

sec(s)   

Question # 8 of 15 ( Start time: 12:39:16 PM )  Total Marks: 1 

Which of the following statements best describes the definition of scarcity? 

Select correct option: 

 There are no buyers willing to purchase what sellers have produced

 There is more than enough money to satisfy consumers' wants

 Resources are limited in quantity and can be used in different ways

 There are not enough goods to satisfy all of the buyers' demand

    

Quiz Start Time: 12:29 PM  Time Left  87

sec(s)   

Question # 9 of 15 ( Start time: 12:40:20 PM )  Total Marks: 1 

Real GDP (Gross Domestic Product) is measured: 

Select correct option: 

 In the prices of a base year.

 In current dollars.

 At a constant output level but at current prices.

 As the difference between the current year’s GDP and last year’s GDP.

    

Quiz Start Time: 12:29 PM  Time Left  85

sec(s)   

Question # 10 of 15 ( Start time: 12:41:49 PM )  Total Marks: 1 

A sustained high rate of growth of an economy results in: 

Select correct option: 

 High rate of growth of the agriculture sector.

 Change in occupational structure in favor of industry.

 Rapid industrialization.

 All of the given options. 

    

Quiz Start Time: 12:29 PM  Time Left  58

sec(s)   

Question # 11 of 15 ( Start time: 12:42:14 PM )  Total Marks: 1 

During periods of poor economic performance, real GDP: 

Select correct option: 

 Declines but unemployment typically does not change.

 Declines and unemployment rises sharply.

 Is unchanged but unemployment rises sharply.

 Declines and unemployment rises moderately.

    

Quiz Start Time: 12:29 PM  Time Left  87

sec(s)   

Question # 12 of 15 ( Start time: 12:43:16 PM )  Total Marks: 1 

As risk premium ? increases, interest rate increases, investment decreases and IS* curve: 

Select correct option: 

 Shifts leftward.

 Shifts rightward.

 Does not change.

 All of the above are possible.

    

Quiz Start Time: 12:29 PM  Time Left  86

sec(s)   

Question # 13 of 15 ( Start time: 12:44:38 PM )  Total Marks: 1 

Which of the following is the largest component of total expenditures? 

Select correct option: 

 Consumption

 Investment

 Government spending

 Net exports

    

Quiz Start Time: 12:29 PM  Time Left  86

sec(s)   

Question # 14 of 15 ( Start time: 12:45:48 PM )  Total Marks: 1 

An increase in the money supply will shift the: 

Select correct option: 

 IS curve to the left and decrease both the interest rate and the level of income.

 LM curve downward (to the right) and increase both the interest rate and the level of income.

 IS curve to the right and increase the level of income but decrease the interest rate.

 LM curve downward (to the right) and increase the level of income but decrease the interest rate.

    

Quiz Start Time: 12:29 PM  Time Left  86

sec(s)   

Question # 15 of 15 ( Start time: 12:47:12 PM )  Total Marks: 1 

The socially optimal rate of growth is: 

Select correct option: 

 Zero.

 Negative.

 Where the marginal social benefit = the marginal social cost.

 Total social costs are minimized.