ECON6049 Economic Analysis Session 2, 2020 Assignment 1 Please note when using diagrams to illustrate answers you must still provide a written explanation of what your diagrams are showing. In...

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ECON6049 Economic Analysis Session 2, 2020 Assignment 1 Please note when using diagrams to illustrate answers you must still provide a written explanation of what your diagrams are showing. In addition, your diagram must be fully labelled and therefore you must label both axes, correctly determine the vertical axis and horizontal axis intercepts of lines, label the slope of lines. 1) (25 marks) Download the spreadsheet data that was used to create Figure 1.2 in your textbook The Economy. You can download the spreadsheet data by clicking on the xlsx link here: https://jackblun.github.io/Globalinc/ Consider the following three countries: Gabon, Greece and Finland. a. For each one calculate the 90/10 ratio in 1980, 1990 and 2014. Note: For Gabon use 1982 which is the earliest year available. (9 marks) b. Describe the differences in the 90/10 ratio between countries revealed by your calculations. (3 marks) c. Describe the changes in the 90/10 ratio over time for each country. (3 marks) d. See this article about Gabon: https://www.theguardian.com/global-development/2016/aug/16/gabon-yawning-poverty-gap-end-dependency-oil On the basis of this article provide a brief explanation for the 90/10 ratio in Gabon between 1980 and 2014. (10 marks) (Word limit 150) 2) (5 marks) Suppose that a very simple economy produces three goods: pasta, tomatoes and cheese. Suppose the quantities produced and their corresponding prices for 2018 and 2019 are shown in the following table: 2018 2019 Product Quantity Price Quantity Price Pasta 40 $3.00 45 $4.00 Tomatoes 100 $6.00 80 $8.00 Cheese 50 $12.00 60 $10.00 a. What is nominal GDP in 2018? (1 mark) b. What is nominal GDP in 2019? (1 mark) c. What is real GDP in 2018, using 2019 as the base year? (1 mark) d. What has been the percentage change in nominal GDP between 2018 and 2019? (1 mark) e. What has been the percentage change in real GDP between 2018 and 2019, using 2019 as the base year? (1 mark) 3) (10 marks) Consider the example of Greta and Carlos discussed in The Economy textbook Unit 1 Section 1.8 and Figure 1.9a and 1.9b. Assume the market price is now 1 tonne of wheat can be traded for 45 apples. Greta proposes a trade of 14 tonnes of wheat with Carlos. a. What would Greta and Carlos have available to consume of both goods if the trade goes ahead? (4 marks) b. Would both Carlos and Greta be better off after the trade? Explain. (6 marks) 4) (20 marks) Suppose the wage (w) is $10 and the price of coal (p) is $20 and a representative firm in the textile industry has two types of technologies available with a goal to produce one unit of cloth: Labour (L) Coal (R) Technology A 8 units 4 units Technology B 2 unit 12 units a. Calculate the production costs required for the two types of technology. Which technology would a firm choose? (3 marks) b. Write down the equation of the isocost line for each technology. Make R the subject of the equation. (2 marks) c. Draw the two isocosts on a diagram. Indicate Technologies A and B and the relative input price ratio. (3 marks) d. Suppose the wage increases to $15 per unit and the price of coal decreases to $5 per unit. Calculate the new production costs for the two types of technology. Which technology would a firm choose? (3 marks) e. Write down the equation of the isocost line for each technology after the change in the relative input price ratio. Make R the subject of the equation. (2 marks) f. Draw the new isocosts on the same diagram and indicate the relative input price ratio. (3 marks) g. Write down the equation to calculate the innovation rent. How much is the innovation rent? (4 marks) 5) (15 marks) Using the model developed in The Economy Unit 3, Section 3.7, consider Alfie who is head barista at a popular café in Sydney. Prior to the coronavirus pandemic he had been receiving a wage of $35 per hour. Assume that Alfie’s spending on goods and services cannot exceed his earnings per day. Maximum consumption (c) per day is: c = w(24 – t) where t = hours of free time per day. a. Initially when facing w = $35 per hour Alfie chooses to work 8 hours per day and have 16 hours of free time per day. Using a fully labelled diagram describe Alfie’s utility maximizing combination of free time and consumption. (4 marks) b. Due to the financial impact of the coronavirus on the café, the owners of the café have reduced Alfie’s wage to $25 per hour. Using the same diagram as used in part “a” show Alfie’s new utility maximizing combination of free time and spending on goods and services assuming that his hours of free time each day decrease to 12 hours. (4 marks) c. On your diagram decompose the overall change in hours of free time in response to the wage decrease into the (i) income effect and (ii) substitution effect. You must use words as well as the diagram to explain the decomposition of the overall change. (7 marks)
Answered Same DaySep 02, 2021ECON6049

Answer To: ECON6049 Economic Analysis Session 2, 2020 Assignment 1 Please note when using diagrams to...

Komalavalli answered on Sep 03 2021
125 Votes
1)
a)
    Country
    Year
    Decile 1 Income
    Decile 10 Income
    90/10 ratio
    Finland
    1980
    7450
    33029
    4.433423
    Finland
    1990
    6524
    26400
    4.046597
    Finland
    2014
    5741
    31527
    5.491552
    Gabon
    1982
    533
    27586
    51.7561
    Gabon
    19
90
    499
    27740
    55.59118
    Gabon
    2014
    439
    28613
    65.17768
    Greece
    1980
    1788
    14657
    8.197427
    Greece
    1990
    2101
    17219
    8.195621
    Greece
    2014
    1181
    17604
    14.90601
b) By comparing 90/10 ratio between the three countries for 3 years, it is revealed that the 90/10 ratio was higher for country Gabon for the years varies between 51-65.Finland 90/10 ratio is smaller for three years varies between 4 and 5.For Greece 90/10 ratio varies between 8 to 14.
c) Changes in 90/10 ratio:
The ratio of 90/10 for Finland in 1980 - 4.43, in 1990 - 4.05, in 2014 – 5.5.Gabon in 1982 – 51.76, in 1990 – 55.59, in 2014 – 65.18, Greece in 1980 – 8.19, in 1990 – 8.19, in 2014 – 14.90.from this we can say that there is an increase in 90/10 ratio for the countries Finland, Gabon, and Greece over three years.
d) The article highlighted that Gabon was one of the richest countries in Africa .It had a population of 1.9 million. Wealthiest oil man in Gabon had $8,300 GDP per capita which was one of the highest in the continent. Around 20 to 35 percent of young people remain unemployed. The country had attracted foreign direct investment and the inequality in Gabon was also high. From our 90/10 calculation of Gabon indicates in 1982 the richest 10% population earns 51.76 times higher than lowest 10% of population, in 1990 the richest 10% population earns 55.6 times higher than lowest 10% of population, in 2014 the richest 10% population earns 65.18 times higher than lowest 10% of population. This indicates that the growth of Gabon increases along with increase in inequality among the people over the period of time.
2)
a) Nominal GDP in 2018
    Product
    Quantity
    Price
    Pasta
    40
    3.00
    Tomatoes
    100
    6.00
    Cheese
    50
    12.00
Nominal GDP = (Pasta quantity x Pasta current market price) + (Tomatoes quantity x Tomatoes current market price) + (Cheese quantity x Cheese current market price)
Nominal GDP in 2018 = $1320
b) Nominal GDP in 2019
    Product
    Quantity
    Price
    Pasta
    45
    4
    Tomatoes
    80
    8
    Cheese
    60
    10
Nominal GDP = (Pasta quantity x Pasta current market price) + (Tomatoes quantity x Tomatoes current market price) + (Cheese quantity x Cheese current market price)
Nominal GDP in 2019 = $1420
c) Real GDP in 2018, using 2019 as the base...
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