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# Post Your Economics Question Here watch

1. What's a positive consequence of inflation?
2. It allows employers to make real wage cuts

3. 23 million households have TV licences in the UK (each household with a TV must buy an annual licence priced at 121pounds, the revenue from which goes to the BBC)

It can be deduced from the diagram that the net consumer surplus is:

A: W-Z

B: W+X+Y-Z

C: W

D: W+X+Y

Hi would really appreciate help with this question
Have really tried but can't seem to figure it out...
well this and one other one. But this one for starters

Edit: my guess is A. But I could be horribly, horribly wrong
4. Hi I have a question that I need help with please.
Discuss the conditions necessary for a country to grow.

Do i mention growth models- i'm really not sure what the conditions are
5. (Original post by Vesta)

23 million households have TV licences in the UK (each household with a TV must buy an annual licence priced at 121pounds, the revenue from which goes to the BBC)

It can be deduced from the diagram that the net consumer surplus is:

A: W-Z

B: W+X+Y-Z

C: W

D: W+X+Y

Hi would really appreciate help with this question
Have really tried but can't seem to figure it out...
well this and one other one. But this one for starters

Edit: my guess is A. But I could be horribly, horribly wrong
You're absolutely right!
6. (Original post by CorpusNinja)
You're absolutely right!
Thanks, but how should I explain why am I right? It was a stab in the dark
7. (Original post by Vesta)
Thanks, but how should I explain why am I right? It was a stab in the dark
Consumer surplus is usually the area under the demand curve until the price line. In this case, you have to take into account that price fixing alters this slightly. The area W is fits the traditional defintion of consumer surplus - the difference between what consumers are willing to pay and what they actually pay (i.e. they are willing to pay more but the market price is lower). We subtract area Z because it is the opposite in a way - the difference between what consumers are willing to pay and actually pay is negative (they are willing to pay less but are forced to pay more by the price fix).

So W is positive for consumer welfare, and Z is negative for consumer welfare.
8. (Original post by CorpusNinja)
Consumer surplus is usually the area under the demand curve until the price line. In this case, you have to take into account that price fixing alters this slightly. The area W is fits the traditional defintion of consumer surplus - the difference between what consumers are willing to pay and what they actually pay (i.e. they are willing to pay more but the market price is lower). We subtract area Z because it is the opposite in a way - the difference between what consumers are willing to pay and actually pay is negative (they are willing to pay less but are forced to pay more by the price fix).

So W is positive for consumer welfare, and Z is negative for consumer welfare.
Thank you
9. A couple questions here guys, I know the crux of the answers, but can never get the expanisive extra marks bit right:

1.) Are free and competitive markets always good news? I've put yes, once a certain income per head is reached; however, a planned system is better in the early stages of development. Do you think this is right?

2.) How can hot money/short financial flows affect an economy? I'm guessing it attracts more foreign investment, so an economy grows rapidly, but if it is short financial flows, does that mean there's a rapid bust too?

10. (Original post by Ploop)
A couple questions here guys, I know the crux of the answers, but can never get the expanisive extra marks bit right:

1.) Are free and competitive markets always good news? I've put yes, once a certain income per head is reached; however, a planned system is better in the early stages of development. Do you think this is right?

2.) How can hot money/short financial flows affect an economy? I'm guessing it attracts more foreign investment, so an economy grows rapidly, but if it is short financial flows, does that mean there's a rapid bust too?

1) I think its hinting at market failure and the need for government in such situations. But there is still a massive amount of debate about this, so you could mention that.
2) Hot money is liquid, short term and usually in 'overheated' sectors which already receive a lot of investment/hype - basically its investment looking for a quick profit. Since hot money can be quickly withdrawn, it can't be used for useful long term investment in capital for example.

Speculation on the currency markets falls in this category. In large quantities, it can lead to a run on the currency, and affect the exchange rate and balance of payments. In fact, look at America now - its currency is falling rapidly in anticipation of a rate cut, and its exports and balance of payments are improving (but with the cost of greater inflation expectations).
11. (Original post by CorpusNinja)
1) I think its hinting at market failure and the need for government in such situations. But there is still a massive amount of debate about this, so you could mention that.
2) Hot money is liquid, short term and usually in 'overheated' sectors which already receive a lot of investment/hype - basically its investment looking for a quick profit. Since hot money can be quickly withdrawn, it can't be used for useful long term investment in capital for example.

Speculation on the currency markets falls in this category. In large quantities, it can lead to a run on the currency, and affect the exchange rate and balance of payments. In fact, look at America now - its currency is falling rapidly in anticipation of a rate cut, and its exports and balance of payments are improving (but with the cost of greater inflation expectations).
You learn something new everyday! Thanks, big help that, I honestly never knew that that was what hot money flow was. Guess I know where I went wrong in the past then.
12. Hey
I'd like help on this question if possible... its a bit more mathematical than the theory of economics but any help would be really appreciated.

Consider a market for car rentals. Initially, this market is in equilibrium, where the equilibrium price is £60 daily for a car and the number of cars rented is 320. It is estimated that in equilibrium the price elasticity of demand is -0.5 and the price elasticity of supply is 3. A new regulation is introduced that says that the maximum price is £57 per car per day.
a. Estimate by how much the number of cars actually rented will change (in percents relative to original equilibrium quantity)
b. Estimate how big the shortage (excess demand) of cars on the market is (again in percents relative to original equilibrium quantity).

13. (Original post by Vivacious_Sky)
Hey
I'd like help on this question if possible... its a bit more mathematical than the theory of economics but any help would be really appreciated.

Consider a market for car rentals. Initially, this market is in equilibrium, where the equilibrium price is £60 daily for a car and the number of cars rented is 320. It is estimated that in equilibrium the price elasticity of demand is -0.5 and the price elasticity of supply is 3. A new regulation is introduced that says that the maximum price is £57 per car per day.
a. Estimate by how much the number of cars actually rented will change (in percents relative to original equilibrium quantity)
b. Estimate how big the shortage (excess demand) of cars on the market is (again in percents relative to original equilibrium quantity).

Right. Well I presume you know which way the demand and supply curves slope and therefore the effect of a price decrease on quantities demanded and supplied. We just need to work out how much, and that's where the PED and PES will be useful.

What does PED tell you? It tells you the % change in quantity demanded from a 1% change in price. Similarly, the PES tells you the % change in quantity supplied from a 1% change in price. So essentially, all you need to do is work out the percetange decrease in price as a result of the regulation. Use the PED and PES to work out the change in demand and supply, add or subtract as necessary from 320 and voila - your new quantity demanded and supplied. As part b points out, the Qd will exceed the Qs (draw a simple supply/demand diagram to see/show why).
14. thank you so much tht cleared a lot!!!!!!!!!!!!!!!
15. what would the impact be on the UK economy if a company moved abroad due to cheaper labour costs?

Thanks
16. Depends on the size of the company, to be honest, but you'd get a fall in employment and so downward pressure on the wage, a fall in consumption etc.
17. I have a question, right, when using calculus with MC and MR and stuff, why is it that the general form of AR is f(q)?
18. (Original post by El Mariachi)
I have a question, right, when using calculus with MC and MR and stuff, why is it that the general form of AR is f(q)?
Because revenue depends on output sold...? I guess I don't understand the question.
19. Right, TR = P.Q or AR.Q

But, put in a "general form" apparently it's f(Q).Q. Is this simply saying that price isn't fixed and will fluctuate depending on quantity, which is why it's a function?
20. (Original post by El Mariachi)
Right, TR = P.Q or AR.Q

But, put in a "general form" apparently it's f(Q).Q. Is this simply saying that price isn't fixed and will fluctuate depending on quantity, which is why it's a function?
That would make sense (P = f(Q)) because price could vary depending on quantity.

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Updated: October 11, 2018
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