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# Post Your Economics Question Here watch

1. Does anyone know why NAIRU is not the same as the natural rate of unemployment?
2. Some undergrad/game theory question, which I'm finding troublesome:

Explain why the two firms play Cournot strategies each period in every
subgame perfect equilibrium if their discount factor, d, is close enough to 0 (firms are very impatient).
3. (Original post by grekoiran)
Does anyone have any experiences of this course?
Went last year to the blackstone unit 1 course and was very impressed. Without being rude, no single course can guarantee you an A*, that's more to do with the hard work you put in throughout the year. However, for the extra exam technique, evaluation advice - this course was very good. In essence, if through your own hard work - you're a B/A student - this course can help you push up to an A/A*. And personally, this course helped me with that extra push.

Hope that helps.

Sure this is basic stuff but a little thrown by a worked example here. I'd greatly appreciate it for someone to correct me.

In the OCR Economics AS book, there's an activity where you have to plot demand curves...

The data below shows the estimated average quarterly sales of diving holidays to Cuba for a small, specialist UK company.

Price per person (£)
1000
900
800
700
600
500
400
300

Quantity Demanded
60
80
110
150
200
300
400
600

a) Using the above data plot the demand curve.

b) For environmental reasons the company has been forced to limit the number of diving holidays 230 per quarter. What price should it charge?

c) The above data was collected three years ago. Since then the UK economy has experienced a period of growth, with real disposable incomes rising by 10%. The demand for diving holidays has also risen by 10%. On the same diagram, draw the new demand curve. What changes do you observe? What price should the company now charge in order to limit the number of holidays to 230 per quarter?

So this is what I came up with:

Attachment 183907

And how I came to this was I just added 10% on top of the price and quantities demanded data, and that produced a second demand curve.
5. Can you help with econometrics?

Consider the following models:
Model A : Predicted lnY = -0.6 + 0.4Xi
; R squared = 0:85; Adjusted R2 = 0:84

Model B : Predicted Y= 1.3 + 0.2Xi
; R squared = 0:73; Adjusted R squared = 0:72

(a) "Model A is better than Model B because its R squared
is higher." Comment.
(b) Do your comments on (a) change if I say that "Model A is better than Model B because its R2 is higher?" Explain.

I honestly have no idea. I don't know if I can use the Jarque-Bera or even test if they are biased.
6. (Original post by thetaxman123)
Can you help with econometrics?

Consider the following models:
Model A : Predicted lnY = -0.6 + 0.4Xi
; R squared = 0:85; Adjusted R2 = 0:84

Model B : Predicted Y= 1.3 + 0.2Xi
; R squared = 0:73; Adjusted R squared = 0:72

(a) "Model A is better than Model B because its R squared
is higher." Comment.
(b) Do your comments on (a) change if I say that "Model A is better than Model B because its R2 is higher?" Explain.

I honestly have no idea. I don't know if I can use the Jarque-Bera or even test if they are biased.
Looks like a pretty standard limitations of R^2 question to me. The only other difference is the log in Model A.
7. http://www.thestudentroom.co.uk/show...652&highlight= can someone help elaborate on my thread?
8. Hello, can you help me answer one of the questions in my microeconomics problem set. Topic is about price discrimination.

Situation: A housing development has 72 middle class families within its boundaries. Water distribution in this housing development is handled by its integral association. Existing water demand is given by Qd=720-3P with Qd measured in monthly cubic meters consumed and P expressed in monthly bill in pesos. Water distribution facilities's fixed cost is 512,000 while total variable cost is 0.82Q.

Required: First, get the profit maximising volume distributed and the monthly profit maximising price per cubic meter. Then, it says that we should use an amortised total fixed cost for 60 months in our calculations.

Second, they already want two-part tariff for future upgrading with estimated cost 216,000 in 5 yrs. Again, amortise upgrading cost by 60 mo. per household using the answer in the first requirement as the variable fee. Then, what will be the monthly water bill per household with two part tariffs inside the housing dev't?

So, can you help me answer this? Actually, what I'm confused is on the amortising part. It would be greatly appreciated if you could give me the steps to answer this. Thank you so much!
9. I'm confused with the topic: 'shut down conditions'
If says in the short run, supply=MC curve above AVC
However this only applies if AR/D is above all values of AVC right?

Again with long run suppy: supply=MC curve above ATC. Is this assuming the AR is above ATC ?

Thank you.
I'm confused with the topic: 'shut down conditions'
If says in the short run, supply=MC curve above AVC
However this only applies if AR/D is above all values of AVC right?

Again with long run suppy: supply=MC curve above ATC. Is this assuming the AR is above ATC ?

Thank you.
P=AR (assuming perfect competition) so if P>MC curve at it's lowest point then the firm will have a positive output. There is no supply curve if P<MC and hence you have the shutdown condition.

The difference between the long-run and the short-run is that all costs are variable in the long-run whereas you have fixed costs in the short-run. In the short-run the firm only has to cover it's variable costs to produce a positive output as although it will make a loss, the loss it makes is smaller than a zero output.

I may have explained this badly so feel free to take me up on anything.
11. (Original post by blueconstellation)
Does anyone know why NAIRU is not the same as the natural rate of unemployment?
It is the same, the NAIRU is the way you measure the natural rate according to Friedman's theory of there being a natural rate where inflation settles. If you observe inflation rates and unemployment rates over enough time you can estimate the NAIRU and that is the estimate of the natural rate of unemployment.
12. (Original post by Chriswuk)
P=AR (assuming perfect competition) so if P>MC curve at it's lowest point then the firm will have a positive output. There is no supply curve if P<MC and hence you have the shutdown condition.

The difference between the long-run and the short-run is that all costs are variable in the long-run whereas you have fixed costs in the short-run. In the short-run the firm only has to cover it's variable costs to produce a positive output as although it will make a loss, the loss it makes is smaller than a zero output.

I may have explained this badly so feel free to take me up on anything.
But it doesn't make sense to me on the graph

Say the demand curve is at P=1.4 would the firm stop production at 185 units then as beyond that AVC>AR?
Thanks ^^
13. Hi, I'm trying to work on some practice questions for my Industrial Organisation module, but despite spending ages (days), I'm not getting anywhere. - I'm about to die, can someone please help me!

2 Shops: Sains & Tesco's located at both ends of 1 mile street.
Equal amounts of 2 types of shoppers: high value / low value.
HV shoppers obtain a value of £vh1 from buying a tub of HaagenDaz ice cream, and an additional value of £vhs if they buy a bottle of Sains syrup, or an additonal value of £vht from Tesco syrup.
LV shoppers obtain a value of £vl1 from buyng a tub of HaagenDaz ice cream, and an additional £vlm from buying either Tesco or Sains syrup.
No shopper will buy more than 1 HaagenDaz ice cream and bottle of syrup. They will buy the 2 together.
Shoppers are uniformly distributed along street and have linear transport costs, walking d miles costs them £td in lost value. Once they have been to either Sains or Tesco, they will having shopping and will just go home.
For both shops HaagenDaz has constant mc of c1, Sains syrup mc is cs, Tesco syrup mc is ct. Both shops can't differentiate between HV & LV shoppers.
Sains charges ps1 for HaagenDaz & syrup psm. Tesco charges pt1 for HaagenDaz & syrup ptm.
Assuming parameter values: vh1=5, vhs=2, vht=3/2, vl1=3, vlm=1, c1=2, cs=1, ct=1/2, t=2/3

1) Assume equilibrium. How far from Sainbury's is the HV shopper who is indifferent between shops?
How far from Sains is the LV shopper who is indifferent between shops? (Answers may be function of firms' prices)
2) Shoppers are visiting Sains & Tesco to buy ice cream. What must be true for them to want to buy syrup as well. Explain why this means Sainbury's will price syrup at either vhs or vlm. And Tesco at vht or vlm.
3) Both shops sell their brand of syrup at vlm. Write each shop's profits as a function of prices. (Include revenue from ice cream, syrup, LV & HV shoppers). Derive optimal price for ice cream. (U should find Sains sell ice cream at £31/12 & Tesco at £9/4. Why's Sains charging a higher price for ice cream despite identical costs?
4) Find both shops' profits at prices found in Q3.
5) Sains sell syrup ae vhs, Tesco keep price at vlm. Whh consumers will buy syrup from Sains and which from Tesco?
6) Under the set-up of Q5, how far from Sains is the HV shopper who is indifferent between shops? How far from Sains is the LV shopper who is indifferent between shops? (Answers should be a function of ps1 and pt1, not the solution from Q3.
7) Under the set-up of Q5, write an expression for each shop's profits as a function of prices. (taking note of: ice cream, syrups, LV & HV shoppers, etc)
8)Someone tells u that when u hold pt1 at the value found in Q3, under the set-up of Q5, by choosing ps1 optimally Sains will make profits of 31/96. They continue that if u repeat the exercise of parts Q5-Q7 assuming that Tesco instead deviate to charging vht for syrup, then with ps1 held at value found in Q3, and pt1 chosen optimally, Tesco will make profits of 27/128. Using answer to Q4 and calculations of this person explain why both firms selling syrup at vlm must be Nash Equilibrium.
9) Sains introduce brand match Guarantee, they'll never price branded goods higher than Tesco. Since both shops only sell non-branded syrup, the promise applies only to HaagenDaz ice cream. What effect does an ice cream price cut have on Tesco profit? Assume each firm still sells syrup at vlm, what price will each firm set for ice cream in equilibrium? What are profits?

I've tried and tried. The lecturer is useless, I hate this module It's eating up all the time allocated for my other modules. Please help me! I just need a full set of questions and answers so that I can use as a guide for learning and seeing how to work stuff out, so I can do other questions. - The books have Qs but no answers At the moment I can't see the wood from the trees! I'm supposed to be able to do the above within 1hr :O
I give my thanks in advance. Much appreciated.
14. How would I draw an externailty diagram for exercise? Please quote me, thank you!
15. Thanks for your help everyone !!
16. I have the essay question:
Employ the Circular Flow of Income to predict the impact/outcome on Gross Domestic Product (GDP) of current fiscal policy in the UK economy.

I already have have a rough idea of what to talk about but I'm worried I may miss some stuff out. Could anyone give me some pointers on which to include?
17. I'm studying Economics & Business with Edexcel, A Level. Was wondering if someone could help me when answering longer questions with a plan of some sort. Showing which part is knowledge, application, analysis and evaluation. I find it hard to structure it, especially when questions may ask about two sides or two different things.

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18. (Original post by cavorting)
I have the essay question:
Employ the Circular Flow of Income to predict the impact/outcome on Gross Domestic Product (GDP) of current fiscal policy in the UK economy.

I already have have a rough idea of what to talk about but I'm worried I may miss some stuff out. Could anyone give me some pointers on which to include?
The latest budget was actually quite a booster for business as spending increased in areas affecting them (more money in flow).
Though this could result in crowding out of business investment. (I)

It also made real term cuts to benefits and pensions which is also a removal from the circular flow. (C)

Corporation tax was slashed by one percent down to 21%, increasing amount in flow. (I)

The budget before that removed a top tier tax which will also increase the amount of money in the flow. (C)

General austerity policy to cut a deficit would remove money from the flow, however.
Increased taxes = less in flow
Decreased government spending = less in flow.
Though taxes haven't been increased in reality and only spending has been cut (still less in flow, could have been more drastic though) (G)

Must remember that all these cuts assume a high MPC. If it was low the extra would likely be saved and therefore removed from flow.
Our economy has a low MPC at present due to lacking confidence across the economy meaning this is probably the case.

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19. (Original post by naseeragani)
How would I draw an externailty diagram for exercise? Please quote me, thank you!
Exercise benefits society as it means more healthy people and results fly a lesser burden on NHS and society as a whole.

Therefore,
Society demands more at a lower price point.

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20. Right if anyone wants to save my neck here please check out these two threads:

http://www.thestudentroom.co.uk/show...php?p=40723738

http://www.thestudentroom.co.uk/show...php?t=2209327&

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