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Reply 400

robertwstewart

On the attachment under Applied Problems question 1. The director of marketing at Vanguard Corporation.

Could you help explain the questions a - ?. I'm not sure how to read and understand this data. I'm not getting any help from the teacher.

ok, to work out the sign of 'a', presume that 'b' and 'c' = 0. So without advertising from Vanguard or its competitors, would the product sell? Sure, I'd expect a few units to go from the shelves even without advertising.

'b' is related to Vanguard's own advertising expenditure. If you think they'd sell more products with more advertising, then the sign will be positive and vice versa.

'c' is related to the rival's advertising. Similarly, how do you expect an increase in their expenditure to affect Vanguard's product sales?

For the other parts, remember that the t-ratio needs to be greater than 2 or smaller than -2 for the coefficient to be significant. Or, since the question specifically asks you to use the p-value, use this passage from the text: "An alternative method of assessing the statistical significance of parameter estimates is to treat as statistically significant only those parameter estimates whose p-values are smaller than the maximum acceptable significance level."

Reply 401

ememnz

I have difficulties with these two questions.

1. An economy has a production function for public (p) and

private goods (q) given by

xp + xq = 24

where xi is the quantity of i produced. The economy has two agents, Anne and

Boris with identical utility functions given by

U = xpxq

Find two Pareto Efficient allocations, specify how much Anne gets (Xpa, Xqa) and how much Boris gets (Xpb, Xqb) as well as the utility for each person.

and

3. An individual.s demand for Hospital visits is given by

PH = 10 - 5Q

and the demand for GP visits is

PG = 10 - Q

Both GPs and hospital doctors cost the same with a MC = 5.

(i) Suppose Government decides to provide GP services for free using a lump-sum tax on tax-payers to fund the service. Explain why this is inefficient and describe what would constitute an actual Pareto improvement. (5 marks)

(ii) If Government is determined to provide one of the services for free, which one would you recommend from an efficiency point of view and why? Interpret your answer in terms of elasticity of demand. (5 marks)

(iii) The above analysis was for 1 individual. Suppose there are 100 people in the community. Ought this change your answer? (2 marks)

Thanks for your help in advance

Reply 402

Epitomessence

"Analyse the effects of entry of supermarkets into the retail petrol market." [6]

Reply 403

alex_hk90

Epitomessence

"Analyse the effects of entry of supermarkets into the retail petrol market." [6]

Sounds like a Unit 1 question, which I haven't done for ages but I'll give it a go.
- Entry of supermarkets increases choice for consumers, and introduces more competition for firms currently in the market.
- The structure of the market may begin to change, from oligopoly towards monopolistic competition. However, there are only a few supermarkets large enough to have the capital to move into the retail petrol market, which has large sunk costs. So it may actually remain an oligopoly.
- The supermarkets are increasing the supply of petrol to the consumer, which should decrease the price of petrol (providing there is no collusion). They may also offer discounts at the petrol stations for shopping at the supermarkets, reducing their profit on the petrol while increasing their market share and their profits on food.
- This may force current petrol firms to reduce their prices as well; this can be linked to the availability of information, inter-dependence and kinked demand curve of oligopolistic markets. However, they may try to differentiate their petrol as being a higher quality than that of the supermarket, to charge a premium on it. This has a good chance of working following the issues with Tesco's petrol which led to many cars breaking down and needing repairs.

Sorry I couldn't give a clearer answer for 6 marks; I ended up waffling quite a bit...

Reply 404

Top_Gear

What is the GNP of the UK (2006)?

Reply 405

alex_hk90

TOM27

What is the GNP of the UK (2006)?

I don't know about GNP, but using this (http://www.statistics.gov.uk/statbase/tsdataset.asp?vlnk=208&More=Y), GDP at current prices in 2006 was £1 299 622 million.
(provided that I'm using it correctly...)

Reply 406

Zygroth

Ugh, having trouble with some economics questions we were set. Basically, we have an article with several questions (Is this how the exam will be btw?)
I'm finding some pretty difficult:

What does a production possibility frontier describe (3 marks)
A production possibility frontier shows the amount of two goods an economy is capable of producing with the scarce resources it has. The line shows the possible combinations of different amounts of the two products that can be produced at 100% efficiency, and the points along the line describe the opportunity cost between the two goods.
Would my answer get me the 3 marks? I'm not sure where they're coming from ...

What does the Chancellor mean when he states that government spending on education will go up in real terms? (3 marks)
Not a clue on this... :frown:

What should happen to the PPF if Government spending on education is effective in improving the quality and efficiency of the workforce? (3 marks)
The whole curve will move outwards, as the factors of production, labour in this case, becomes more efficient and increases.
That's all I have, and I can't think of anything else to say. I don't think I'll get 3 marks for it either...

I'm hoping I can handle the rest, because I don't want to look like a complete idiot by posting every single question up here :p:

Any help on these would be great, thanks :smile:

Reply 407

Apagg

'Real terms' means allowing for inflation. I.e. If spending increases 6% but there has been 2% inflation, then real spending has only increased 4%

Your other two answers are basically right, I always used to write very short answers in the same way. You just need to get used to padding.

Reply 408

Zygroth

Apagg

'Real terms' means allowing for inflation. I.e. If spending increases 6% but there has been 2% inflation, then real spending has only increased 4%

Oh right, thanks :smile:

Apagg

Your other two answers are basically right, I always used to write very short answers in the same way. You just need to get used to padding.

You'd get more marks for putting in a load of crap which mean nothing than for having an answer directly related to the question and therefore saves the examiner time?

Reply 409

alex_hk90

Zygroth

You'd get more marks for putting in a load of crap which mean nothing than for having an answer directly related to the question and therefore saves the examiner time?

The mark allocation for your questions seems a bit arbitrary.
In real papers they generally ask for around the right number of marks for the question.

To pad your answer to the last question, you could simply state that it is now possible to produce more of one of the goods, without giving up any of the other goods, or that it is now possible to produce more of both of the goods.
Or you could say how the shift of the PPF curve represents potential growth.

Reply 410

Epitomessence

1. To what extent is the demand for workers in banking inelastic?

2. Using economic theory, suggest why banks have increasingly changed over to paying bonuses to their workers.

Reply 411

alex_hk90

Epitomessence

1. To what extent is the demand for workers in banking inelastic?

Elasticity of demand for workers depends on the demand for the product, the availability of substitutes (other labour or capital), the time span, and the proportion of the firm's total cost.
In the case of workers in banking (in general), the demand for labour will be relatively inelastic because the demand for the product is inelastic, there are few (if any) substitutes and labour costs make up a high proportion of the firm's total cost. In the long run, the demand may be more elastic as workers switch from other occupations or decide to go into banking due to the higher wages.

Epitomessence

2. Using economic theory, suggest why banks have increasingly changed over to paying bonuses to their workers.

In reality, workers in banking are not homogeneous and therefore do not all have the same MRP. Banks have to pay all the workers doing a given job the same basic wage rate. However, some workers (who perform exceptionally well) may believe that they have a particularly high MRP, and demand higher pay from the bank. Not wanting to raise the pay of all its workers, the bank may introduce performance-related pay schemes (such as bonuses) to keep these workers from leaving to join another bank. This is a form of wage discrimination.

I'm not sure if I've written enough as you haven't specified any mark allocations but that should give you a start. And I feel that I'm missing something in the 2nd question as we haven't really studied bonuses yet.
Hope it helps anyway. :smile:

Reply 412

robertwstewart

How does a price ceiling undermine the rationing function of market-determined prices?

How could rationing coupons insure that consumers with the highest values get the limited amount of a good supplied when government price ceilings create shortages?

Explain based upon demand, supply and market equilibrium.

Reply 413

MeAndBubbles

With a price ceiling, who is first in the queue in part determines it, not solely who can afford to pay the market price.

Reply 414

Apagg

If the price ceiling is above the market equilibrium price, it has no effect since the price is reached below it.
If the price ceiling is set below the equilibrium price, then the price will be "too low", resulting in excess demand, and so the product has to be rationed by means other than price.

As for the vouchers, you'd have to find a way of giving them to those with the highest value (such as allowing the market to set a price...but that rather undermines the whole price ceiling exercise). Once that's done, if the vouchers are required to purchase the goods, they will go to those with the vouchers and hence the highest need - though you may want to consider the possibility of a black market.

Reply 415

robertwstewart

Thanks

Reply 416

Zygroth

We were told, for Edexcel Economics AS, that you get marks for Knowledge, Application, Analysis, and Evaluation. I think I understand what the Knowledge marks are for, but I don't really know what the other 3 are...Application is applying the knowledge to the context, but surely that's also to do with saying whether it's a good thing or bad thing, which is also Analysis and Evaluation? :O A little confused here :frown:

Reply 417

alex_hk90

Zygroth

You've got the general idea.
I do OCR Economics (A2 now) and those 4 basically correspond to the 4 levels we have to pass through to get the higher marks.
Application is simply giving context to the knowledge.
Analysis I'd say is going into more detail, drawing the diagrams, suggesting possible effects, etc.
Evaluation is where you'd say if it's a good thing or a bad thing (if you wanted to). You'd also suggest limitations to your analysis, other factors to consider, etc.

Reply 418

username102860

Does anyone have the OCR Development paper/examiner's report/mark scheme from 2005? It's the only set missing from my notes.

Reply 419

username102860

In addition to my earlier request, could someone please tell me why values for GNP per head (US$) could be so different for GDP per head (ppp US$), considering GDP is a part of GNP?

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