Pset2 - D = 16 – 2p Supply of corn is given by q S = p...

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EC115 – Methods of Economic Analysis Problem Set 2, Week 4 1. Find the solution (if it exists) to the following linear systems: (a) y = 2x – 3 2y – 3x = 4 (a) x + 1/3y = 10/3 y = -3x + 10 (b) y = 2x – 4 4x = 2y – 12 Check your solutions graphically. 2. Consider the following macroeconomic model: Y = C + I + G C = 50 + 0.8Y I = 10 G = 20, where Y = national income, C = consumption, I = investment and G = government expenditure. (a) Find the equilibrium of the model. Show it graphically. (b) Suppose G increases to 40. How does this change your answer in (a)? Show in a graph. 3. Consider a market for corn. The demand function is given by q
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Unformatted text preview: D = 16 – 2p. Supply of corn is given by q S = p – 2. (a) Derive the inverse demand and supply functions, and solve for the equilibrium. Show your solution in a graph. (b) Suppose the government imposes a specific tax on suppliers of corn. The tax rate is t = 3 (pence per kilo sold). Compute the new equilibrium. How does your answer differ from part (a)? Show graphically. (c) Show graphically the tax revenues received by the government. (d) Now suppose that the government imposes the same specific tax as in (b) but on consumers. Compare this case with the answer in (b)....
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This note was uploaded on 12/31/2011 for the course ECON MR 102 taught by Professor Huyduong during the Winter '11 term at RMIT Vietnam.

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