right. d. a 10% reduction in personal income tax rates (with no change in government spending). AD curve would shift to the right‚ an increase in aggregate demand. A reduction in personal income tax rates raises take-home income and increases consumer purchases at each possible price level. Tax cuts shift the aggregate demand curve to the right. e. A sizeable increase in labor productivity (with no changes in nominal wages). Increases in productivity reduce the per-unit production cost of
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change in demand. So‚ taste and preferences is important determinant of demand. For example‚ if taste of a tea increases in comparison of coffee‚ the demand of tea increases and coffee decreases and vice versa. And in the hot season the taste of consumer will change and they prefer cold drinks rather than hot beverage like tea and coffee. • Changes in price of Related goods: There are two types of related goods i.e. substitutes goods and compliments goods. Both these goods influence the quantity
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fundamental factors on both sides is essential to business success. Focusing on the Chick-fil-A fast food chain‚ there are factors that are a determinant to supply and demand. A technology change‚ the price of substituting goods‚ population changes and consumer preferences all impact business operations. Technology changes within Chick-fil-A restaurants will allow locations to run efficiently and assist in quality in which goods and services are offered. One feature in particular the restaurant offers
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budget line has a negative slope? What does the slope of the budget line equal? d) What is an indifference curve? e) Why do consumers prefer higher indifference curves (farther to the right) to lower indifference curves? f) In an indifference curve/budget line framework‚ how does a consumer decide which of all possible combinations of goods to purchase? g) Describe the consumer equilibrium in the indifference curve/budget line model. h) In a budget line/indifference curve figure‚ how do you identify
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Utility Maximization Steps MPP 801 Fall‚ 2007 The MRS and the Cobb-Douglas Consider a two-good world‚ x and y. Our consumer‚ Skippy‚ wishes to maximize utility‚ denoted U (x‚ y). Her problem is then to Maximize: U = U (x‚ y) subject to the constraint B = p x x + py y Unless there is a Corner Solution‚ the solution will occur where the highest indifference curve is tangent to the budget constraint. Equivalent to that is the statement: The Marginal Rate of Substitution equals the price ratio‚ or px
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happens it can cause a multitude of other things to happen. Every little thing we do affect the economy. 2. What are some of the advantages and disadvantages to a market economy? Some of the advantages of a market economy is competition. This allows consumers to have multiple options when choosing a good or service. Another advantage is private ownership. People own their companies instead of the government. Actually‚ there is only a small amount of government involvement in a market economy. One disadvantage
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Personal satisfaction - A trade off - Management type distilled from behavioural characteristics that can be both identified and observed - Profit Maximisation Assumptions: - Perfect Knoweledge (companies do not have the information that traditional theory assumes). Rational Models Maximise Profit Examples: - ? Answer: 1. Intro a. Behavioural management models provide an alternative view to neo-classical b. By identifying the influence of managerial behaviour we are able to develop a more
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Solution to the Sample Questions for the Mid-term Exam Draft: March 22‚ 2011. 1. (Marshalliand & Hicksian Demand‚ Indirect Utility Function‚ Cobb-Douglaus) (1) A consumer’s Marshallian demand function specifies what the consumer would buy in each price and wealth (or income)‚ assuming it perfectly solves the utility maximization problem . (1) The problem has a unique optimal solution when (2) since the utility function in (1) represents well-behaved preference. By putting 1 into
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The Life Cycle Hypothesis Formulated by Franco Modigliani of MIT. 1. The theory basically says that individuals plan their consumption and savings behaviour over the long term with a view of allocating incomes in the best possible way over their entire lifetimes. 2. This implies different marginal propensities to consume out of permanent income‚ transitory income (temporary) and wealth. 3. The basic idea is that individuals will spend the different incomes differently with a view
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ASSIGNMENT No. 1 (Units 1-4) Q.1 Explain the definitions of economics given by the economists on the basis of wealth‚ welfare and scarce resources. Also differentiate between micro and macroeconomics. (20) Q.2 a) Explain the equilibrium of a consumer with the help of indifference curve and budget line. (10) b) Explain the division of price effect into substitution effect and income effect in the cases of normal good and inferior good. (10) Q.3 a) What is meant by point elasticity and arc-elasticity
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