ECN101_PS1_ans

ECN101_PS1_ans - This Problem Set is not collected. ECN101...

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This Problem Set is not collected. ECN101 Instructor: Masako Miyanishi Problem Set 1 1. A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. a. What is the value added by each person? Producer Value Value-added Farmer (wheat) $1.00 $1-$0=$1 Miller (flour) $3.00 $3-$1=$2 Baker (bread) $6.00 $6-$3=$3 b. What is the contribution to GDP? The value of final good: $6 or total of value-added : $1 + $2 + $3 = $6 2. Suppose a woman marries her butler. After they are married, her husband continues to wait on her as before, and she continues to support him as before (but as a husband rather than as an employee). How does the marriage affect GDP? How should it affect GDP? Before the marriage, the woman paid a salary to the butler for his service, and the salary she paid was included in GDP as household consumption. After the marriage, the service is not counted for GDP
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This note was uploaded on 04/18/2008 for the course ECON 101 taught by Professor Miyanishi during the Fall '08 term at UC Davis.

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ECN101_PS1_ans - This Problem Set is not collected. ECN101...

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