Principles of Economics (Common for Private Registration to BA History‚ Political Science‚ Sociology‚ & Islamic History Programmes) 1. a) b) c) d) e) In Economics the central problem is: money production consumption allocation scarcity 2. a) b) c) d) Macroeconomics deals with: the behaviour of firms. the activities of individual units. economic aggregates. the behaviour of the electronics industry 3. a) b) c) d) Microeconomics is not concerned with the behaviour of: firms. aggregate demand.
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firms are buyers. -Inner loop of circle reps flows of inputs and outputs -Outer loop reps corresponding flow of dollars -More complex circle flow diagram includes roles of government and international trade Production Possibilities Frontier -Graph that shows the various combinations of output that the economy can possibly produce given the available factors of production and the available production technology that firms can use
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optimal bundle contains 10 scones. b) (2) Illustrate his optimal bundle in your diagram for (a); label it A. Why is this choice optimal? What conditions does it satisfy? Ans: This bundle maximizes Rajan’s utility‚ because it is on the highest indifference curve he can attain given his income and the prices he faces. The two conditions are i) it is on his budget line‚ so all his money is spent‚ and ii) at this bundle his marginal rate of substitution is equal to the price ratio. c) (2) How many kg
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40 marks) Choose the most correct answer for each of the following ten multiple choice questions. Note: No explanation is required. Please answer in the order of the questions. 1. Ceteris paribus‚ which of the followings would shift the demand curve for new textbook to the right? a. b. c. d. e. f. An increase in the price of the textbook; An increase in the supply of equivalent used textbooks; a only; b only; Either of the above; *None of the above; 2. Jay always feels 1 unit
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Review Sheet for Test 1 Chapter 1 • Accounting cost‚ Implicit costs‚ Economic cost • Accounting profit / Economic profit • Normal profit • Finding derivatives o For instance how to find marginal benefit (MB) or marginal revenue (MR)‚ marginal cost (MC)‚ etc. • Optimization rule (For instance‚ how to find output level Q that maximizes total revenue‚ or total profit) • Marginal analysis Chapter 2 • Demand function. • Determinants of demand
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CONSUMER THEORY I Consumer theory – deals with how a consumer chooses the best bundle of goods he/she can afford. BUDGET CONSTRAINT To know which bundle of goods a consumer can afford‚ we have to look into the consumer’s budget constraint. We first assume that there are only two goods‚ say good x1 and x2. A consumer can choose from bundle A (3‚ 2) – 3 units of good 1 and 2 units of good 2; bundle B (6‚ 5) – 6 units of good 1 and 5 units of good‚ so forth. Given the price of good 1 (p1)‚
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Question (2010/2011 Exam – Q7 (section B)): The Capital Asset Pricing Model holds in economies satisfying a certain set of conditions. State four of these conditions and identify why they are essential for the model to hold (you are not expected to derive the entire model but you must identify the steps in the theory where these conditions play an important role). Under 7 sets of key assumptions‚ we know that all agents will hold a particular market portfolio‚ which consists of the same proportion
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developed an appreciation for the economic analysis of these themes and acquired some core competences. In particular‚ teacher of the later economics units will assume that you are familiar with the following: 2 -The basic consumer theory: indifference curves‚ income and substitution effects‚ the derivation of -Individual demand and market demand. Definition of elasticities. -The basic production theory: relationships between total‚ average and marginal costs and determination of prices ‚ consumer
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the demand curve of a commodity? 5) Define Giffen good. 6) ” If PPC curve will be the straight downward sloping line‚ marginal opportunity cost is constant” – prove the above statement by explaining with an illustrated schedule and a diagram 7) What do you mean MRS? What happens to MRS when consumer moves downwards along the indifference curve? Give reason 8) Draw the demand curve with a schedule and explain the law of demand. 9) State and explain the properties of indifference curve [3] [3] [3]
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substantially‚ the demand curve for gasoline would most likely A) shift leftward. B) shift rightward. C) remain unchanged. D) become steeper. 2. Recently‚ many cities have attempted to pass laws taxing the sale of sugary drinks such as soda pop. If one of these laws passes‚ we would expect A) the supply curve for soda pop to shift to the right. B) the supply curve for soda pop to become more vertical. C) the demand curve for soda pop to shift to the right. D) the demand curve for soda pop to shift
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