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Unformatted text preview: Foundations of Economic and Financial Models Jrgen Meinecke EMET 1001/7001 School of Economics Semester 2, 2010 Australian National University Tutorial Questions for Week 4 (09/08/201013/08/2010) Inequalities 1. What can be said about the signs of the numbers a,b,c in each case? ( a ) abc > ( b ) ab c < ( c ) a bc > ( d ) a 2 bc < . Comparative Statics 2. Given the following inverse supply and demand functions: p d =- . 25 q d + 15 p s = 0 . 1 q s + 8 (a) Find the equilibrium price and quantity. (b) Suppose the government imposes an ad valorem tax of 50% of the supply price. Find the new equilibrium price and quantity. (Hint: An ad valorem tax is NOT a per unit tax. Instead it is a tax that is proportional to the sales price.) (c) Sketch the graphs before and after tax. 3. In macroeconomics, aggregate household consumption C is a function of disposable income Y d : C := aY d + b . The parameter a is called the marginal propensity to consume (why?) and the parameter b is called autonomous consumption...
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