help with question (1 Viewer)

[user18181818]

hi how do u do this - answer is C
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[user18181818]

please anyone

 

[chilli 412]

i dont do economics sorry

 

[user18181818]

also why is this question D?

 

[trenboloneacetate]

hi how do u do this - answer is C
View attachment 39919'

So you only really need to look at the difference in Y and C between two rows. Take row 1 and 2, Y increased by 1000m, and C increased by 750m, thus, 3/4 of income is spent, and as such 1/4 or 0.25 is spent for every extra dollar of income. Equilibrium level of income is when AD = AS, where in this three sector model AD is C+I, ad AS is Y, now look at which row C+I=Y and its the last row at 5000m. Thus the answer is C since the equilibrium level of income is 5000m and MPY is 0.25Y.

 

[trenboloneacetate]

also why is this question D?
View attachment 39959

Because the question states "subsidise the cost", not the production cost so its focusing on the demand side of things. It can only therefore be C or D but C puts private benefits at a higher level of demand then social benefits which isn’t true cause since the drug helps people, so the answer is D.

 

[user18181818]

So you only really need to look at the difference in Y and C between two rows. Take row 1 and 2, Y increased by 1000m, and C increased by 750m, thus, 3/4 of income is spent, and as such 1/4 or 0.25 is spent for every extra dollar of income. Equilibrium level of income is when AD = AS, where in this three sector model AD is C+I, ad AS is Y, now look at which row C+I=Y and its the last row at 5000m. Thus the answer is C since the equilibrium level of income is 5000m and MPY is 0.25Y.

why do you look at the last row for the equilibrium income?

 

[trenboloneacetate]

why do you look at the last row for the equilibrium income?

because you look for where Y=C+I, which only happens at the last row (5000=4250+750)

 

[user18181818]

because you look for where Y=C+I, which only happens at the last row (5000=4250+750)

cheers tysm