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Gurdeep Singh-Guri
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One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur.
On Jul 12, 2024
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Consider a competitive market with supply and demand curves expressed as:
Supply P = 5 + 0.036Q Demand P = 50 - 0.04Q,
where P represents unit price in dollars and Q represents sales rate in units per day.
a. Determine the equilibrium price and sales rate.
b. If this were the labor market for low skilled workers, what would be the loss in consumer surplus (purchaser surplus) when the minimum wage is set at $40 per day (an eight hour day)?
c. What is the loss or gain in producer surplus (seller surplus) in part b. above?
Supply P = 5 + 0.036Q Demand P = 50 - 0.04Q,
where P represents unit price in dollars and Q represents sales rate in units per day.
a. Determine the equilibrium price and sales rate.
b. If this were the labor market for low skilled workers, what would be the loss in consumer surplus (purchaser surplus) when the minimum wage is set at $40 per day (an eight hour day)?
c. What is the loss or gain in producer surplus (seller surplus) in part b. above?
On Jul 09, 2024
a.Equilibrium price (wage rate) and sales rate (employment rate) are computed as follows:
5 + 0.036Q = 50 - 0.04Q
0.076Q = 45
Q = 592.11 units per day
Wage rate = P = 50 - .04(592.11) = $26.32 per day
b.Consumer surplus lost would be the area bounded by the minimum wage $40, the market equilibrium wage $26.32, the employment rates, before and after wages, and zero employment. We have a trapezoid made up of a rectangle and a triangle. The rectangle is bounded by the two wages, zero sales, and sales rate at the minimum wage.Height of rectangle = WM - WE = 40 - 26.32 = 13.68
Base of rectangle = QM = ?
PM = 50 - 0.04QM
40 = 50 - 0.04QM
QM = 250
Area of rectangle = b ∙ h = (250)(13.68) = 3,420.
Area of triangle with base measured on the vertical.
Base length = PM - PE = 13.68
Height = QE - QM = 592.11 - 250 = 342.11
Area = (1/2)b ∙ h = (0.5)(13.68)(342.11) = 2,340
Thus, consumer surplus lost = 3420 + 2340 = $5760 per day.
c.The producer surplus also has two parts. Producers gain the surplus in the rectangle lost by consumers in part b.Area = 3,420. But, the loss in employment (sales) represents a loss in surplus. This loss is a triangle bounded by supply, equilibrium wage rate, and the two levels of employment (sales rates). The only thing left to compute is the height of the supply curve at
QM = 250.
Supply P = 5 + 0.036(250) = 14.
The area of the triangle of loss is (1/2)(b ∙ h).
Base = b = 342.11 (measured horizontally)
Height = h = 26.32 - 14 = 12.32
Area of triangle = (0.5)(342.11)(12.32) = 2,107.40
Net change in producer surplus = $3420 - 2107.40 = $1,312.60
5 + 0.036Q = 50 - 0.04Q
0.076Q = 45
Q = 592.11 units per day
Wage rate = P = 50 - .04(592.11) = $26.32 per day
b.Consumer surplus lost would be the area bounded by the minimum wage $40, the market equilibrium wage $26.32, the employment rates, before and after wages, and zero employment. We have a trapezoid made up of a rectangle and a triangle. The rectangle is bounded by the two wages, zero sales, and sales rate at the minimum wage.Height of rectangle = WM - WE = 40 - 26.32 = 13.68
Base of rectangle = QM = ?
PM = 50 - 0.04QM
40 = 50 - 0.04QM
QM = 250
Area of rectangle = b ∙ h = (250)(13.68) = 3,420.
Area of triangle with base measured on the vertical.
Base length = PM - PE = 13.68
Height = QE - QM = 592.11 - 250 = 342.11
Area = (1/2)b ∙ h = (0.5)(13.68)(342.11) = 2,340
Thus, consumer surplus lost = 3420 + 2340 = $5760 per day.
c.The producer surplus also has two parts. Producers gain the surplus in the rectangle lost by consumers in part b.Area = 3,420. But, the loss in employment (sales) represents a loss in surplus. This loss is a triangle bounded by supply, equilibrium wage rate, and the two levels of employment (sales rates). The only thing left to compute is the height of the supply curve at
QM = 250.
Supply P = 5 + 0.036(250) = 14.
The area of the triangle of loss is (1/2)(b ∙ h).
Base = b = 342.11 (measured horizontally)
Height = h = 26.32 - 14 = 12.32
Area of triangle = (0.5)(342.11)(12.32) = 2,107.40
Net change in producer surplus = $3420 - 2107.40 = $1,312.60
GS
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According to research, three types of environmental uncertainty that people perceive are state, effect, and response uncertainty.
On Jun 12, 2024
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GS
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According to Keynes,lengthy recessions can occur because
A) nominal wages fall rapidly when there is a decrease in aggregate demand,which leaves workers with less income to spend.
B) the stock market tends to overreact to economic forecasts.
C) there is significant downward rigidity in prices and wages.
D) None of the choices are correct.
A) nominal wages fall rapidly when there is a decrease in aggregate demand,which leaves workers with less income to spend.
B) the stock market tends to overreact to economic forecasts.
C) there is significant downward rigidity in prices and wages.
D) None of the choices are correct.
On Jun 09, 2024
C
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An online shoe retailer wants to introduce handling charges for purchases less than $50.How should the retailer pose the charges to its customers to improve its chances of being well-received?
A) Introduce it separately as handling
B) Lump it together with shipping costs,but don't let the customer know until they check out
C) Introduce it as free above $50
D) Hide it from the customer
A) Introduce it separately as handling
B) Lump it together with shipping costs,but don't let the customer know until they check out
C) Introduce it as free above $50
D) Hide it from the customer
On May 13, 2024
C
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SanDisk's MP3 player product line (called the Sansa)has a low relative market share. The MP3 player market is expected to decline over the next few years. In Boston Consulting Group (BCG)portfolio analysis, the Sansa would be considered a dog.
On May 10, 2024
True