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1. Learnin about elasticity at college and need help on few questions. (got a test on monday on elasticity epp!)

1) if the cross price elasticity of demand for xbox games in relation to xbox consoles is -1.2, explain the likely effect on the demand for games as a result of the price cut. (and how would the supply n demand diagram look)

2) discuss the likely effect on demand for both xbox and games if there were a decline in real incomes in major markets like UK, USA, JAPAN. (i thought this question was easy until i found out that its 15marks!! - what do i write about?)
2. (Original post by Apagg)
That doesn't work, you've just shown that production increases with inputs

LRAC is decreasing in quantity because output is a nonlinear function of inputs. I.e. Doubling inputs more than doubles output, (it quadruples it), so you double the costs but quadruple the output, so average costs must be falling.
Mate I've found out that the equation is q=(K)L^2 does it yield the same answer?
3. Guys,
Are there any students here who do EdExcel AS Economics Unit 1? If so, how far are you in the course? I think I'm quite behind you lot 'cause I am still in Supply Curves.

Anyway, i've got a question to all of you dear economist:

Discuss two factors that could change the price elasticity of demand for gold in the future.

And some keypoints needed to answer the question:
- Some economists are suggesting that the degree of positive cross elasticity of demand between gold and silver is declining.
- Demand for gold jewellery has increased in the UK in recent years but is still sensitive to changes in price.

Demand Schedule for a gold ring in a large UK jewellery shop:
Original Price: £ 2000 ; Quantitiy Demand: 50
Increase: £ 2200 ; Quantity Demand: 44

Thank you very much!!
4. (Original post by Kev123)
Mate I've found out that the equation is q=(K)L^2 does it yield the same answer?
Yes, except you can now distinguish between SR and LR AC. In SR, only one input can be increased. If that input was capital, the SRAC would not fall because output is linear in capital. It can only be falling in the LR, as it is non linear in labour
5. I need some help.

Is the following true?

1) Supply curve is marginal cost curve.
2) Demand curve is average revenue curve.

If true, why is 2nd one average, whlie first one is marginal?
6. Well, both consumers and firms operate 'at the margin'. Marginal utility for consumers and marginal cost for firms.

It's true, only for perfectly competitive firms or monopoly firms under a regulated price, marginal cost pricing. And it's called allocative efficiency.
7. How can diminishing marginal returns affect a firms cost of production?

It seems straight forward, that, if a firm keeps employing people that don't earn the firm as much money as their wage that production costs will go up. But what else ?
8. The last point doesn't happen in a competitive market in the longrun. Profit maximisers employ until the MC*MP=W. In the short-run this may not apply because of costs of sacking people.

Anyways...you're describing the law of variable proportions or diminishing returns. One factor is fixed. You stated it pretty well. Maybe other costs could be 'hiring cost' ie. interviews, paying bus fares to interviews, advertising the vacancies.
9. (Original post by Kobulingam)
I need some help.

Is the following true?

1) Supply curve is marginal cost curve.
2) Demand curve is average revenue curve.

If true, why is 2nd one average, whlie first one is marginal?

1. True. It is the firm;s supply curve.

2. True. AR = MR = D where AR = average revenue, MR = Marginal revenue.

Therefore, the answer to the last part = MR = AR...they are the same...
10. Anyone have Mark schemes for GCE ECN 1 2003/04 Market & Market Failure exam papers; I use past papers to revise, only when I downedloaded and did the question papers I was unable to find the mark schemes anywhere... no point in doing them if i can't find out how well I did.
I need both exam question mark scheme and the multiple choice, would be VERY grateful if anyone could dig them out
11. (Original post by Kobulingam)
I need some help.

Is the following true?

1) Supply curve is marginal cost curve.
2) Demand curve is average revenue curve.

If true, why is 2nd one average, whlie first one is marginal?
as has been said, it's 2) is the marginal revenue or average in perfect comp, but is average in imperfect or monopoly.
12. Ok.

So from a producer point of view,

Supply curve is marginal cost curve
Demand curve is average revenue curve

Thus as a "duality", consumer point of view would have to be,

Demand curve is marginal benefit curve
Supply curve is average cost curve

I hit it bang on?
13. (Original post by Kobulingam)
I need some help.

Is the following true?

1) Supply curve is marginal cost curve.
2) Demand curve is average revenue curve.

If true, why is 2nd one average, whlie first one is marginal?
Hi,
1.Supply curve is the MC curve above the AVC under perfect competition. Think about the shutdown condition, a producer will not supply unless he can cover his running costs in the short-run. The monopolist on the other does not have a unique supply curve, because he charges a price greater than MC (mark-up).

2. Demand curve is always equal to the AR regardless of the market stucture. Go back to the formula for AR.
AR=TR/Q
= P*Q/Q
= P
Since AR=P at each level of output, it is the demand curve showing the relationship between price and quatity.
14. Hi,
I have a question on the circular flow of income, which deals with injections and withdrawals in a macroeconomy. In the model injections are always equal to withdrawals.

Savings is considered as a withdrawal. It is assumed that once a persons saves, that money goes to a bank which somehow gets injected back into the circular flow as an investment.

My question is:

What happens to flow of money if the money is not saved in a bank or financial institution, but instead is stashed under the pillow at home indefinitely? Will withdrawals still be equal to injections in such a case?

Thanks
15. (Original post by Apagg)
Yes, except you can now distinguish between SR and LR AC. In SR, only one input can be increased. If that input was capital, the SRAC would not fall because output is linear in capital. It can only be falling in the LR, as it is non linear in labour
Mate another quick question - On a given indifference curve, the marginal utility of good x must be equal to the marginal utility of good y..True or False

I chose false as I thought the only point where MUx=MUy is where the indifference curve and the budget line are tangent i.e the optimal point...What do you think?
16. (Original post by Kev123)
Mate another quick question - On a given indifference curve, the marginal utility of good x must be equal to the marginal utility of good y..True or False

I chose false as I thought the only point where MUx=MUy is where the indifference curve and the budget line are tangent i.e the optimal point...What do you think?
False. Easiest way to see this is to consider the slope of the IC, which is the MRS, or MU1/MU2 (dependent on construction of axes).
If MU1 = MU2, the slope would be (-)1 and the IC would be a straight line. So in general the marginal utilities are not equal at all points
17. Cheers mate i really do appreciate the help.
18. (Original post by Kobulingam)
Ok.

So from a producer point of view,

Supply curve is marginal cost curve
Demand curve is average revenue curve

Thus as a "duality", consumer point of view would have to be,

Demand curve is marginal benefit curve
Supply curve is average cost curve

I hit it bang on?

this duality idea, i've only seen in the input market eg. labour, not the output market. I certainly could find the names of the curves if it's the input market.
19. Could someone please tell me where I'm going wrong here?

Derive the economy's IS curve where:

C = 100 +0.8(Y-T); I = 50-40i; G = 100; T = 20

Using this formula for real income: Y = C(Y – T) + I + G
Y = [100 + 0.8(Y – 20)](Y – 20) + 50 – 40i + 100
Y = (84 + 0.8Y)(Y – 20) + 150 – 40i
40i = 84Y – 1680 + 0.8Y² + 150 -17Y
i = (Y²/50) + (67Y/40) – (153/4)

I don't think that this is right though, because the IS curve should slope downwards, and when I put Y=20 and Y=30 into the equation, i increases, when in theory, it should decrease. Have I used the wrong formula??

Thanks for any help! (Rep+)
20. I saw 2 mistakes, how did you get 84? But before that you wrote (Y - 20)(Y-20), it should only be once (Y - 20)

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