ECON1001 Past exam paper (1 Viewer)

[sarevok]

Has any one in Steams 1 + 2 attempted the past exam paper de roos put up on blackboard? How do you do q.6 in the multiple choice?

"The current price of burgers is 4.00. The government wants to reduce the consumption of burgers by 25%. If the price elasticity of deamd for burgers is -0.4 (or 0.4 in absolute terms), what must be the new price of burgers so that the government achieves its goal? Use the initial point-elasticity formula, also called the original-point formula, also called the point elasticity formula.

a) $6.50
b) $3.00
c) $5.00
d) $10.00
e) A higher price than $4.00, but none of the above."

 

[Sarah168]

elasticity = % change in qty / % change in price

= 0.25 / [(New price – Old price)/ Old price]
= 0.25 / [(New price – 4)/ 4]
= 0.4


So 0.25/ 0.4 = (New price – 4)/ 4

New price = 6.5

Edit: WOO HOO! I finally get elasticity in my head. Grrr I hate that topic

 

[sarevok]

thanks

is that the formula you guys were given to calculate point elasticity? in de roos' stream we were told to calculate it as the inverse of the slope of demand * price/quantity, iirc no other formula was mentioned.

and i don't see how you can do that question with the formula we were given...=\

 

[Sarah168]

a) Arc elasticity = [∆Q/ Qave] ÷ [∆X/ Xave]
= [∆Q/ ∆X] ÷ [Qave/ Xave]

b) Point elasticity = [∆Q/ Qoriginal] ÷ [∆X/ Xoriginal]
= [∆Q/ ∆X] ÷ [Qoriginal/ Xoriginal]

we were given that in the lecture notes and i follow the point formula most of the time unless it asks for both (i think its rare to be asked for arc only though from what my tutor said) but i do remember vaguely something about inverses being mentioned....i hope its not important because i cant find any notes on it in the lecture notes i took down...

 

[sarevok]

Yeah, the way we were told to calculate point elasticity was:

(dQ/dP) * P/Q

where dQ/dP is the inverse of the slope of demand, so I guess that's what they meant when they were talking about inverses...though I'll probably just use the formula you guys were given from now on.

Do you have all of Dennis' lecture notes, or can you get them off blackboard? If so, can you please post up Dennis' notes on taxes/subsidies? For some reason De Roos has lecture notes on taxes but there's nothing in there on subsidies.

 

[Sarah168]

yeah we didn't get stuff on subsidies either. We just covered them in tutorials. It's just the opposite of taxes anyway

 

[yvonne_710]

can someone explain the cournot and bertrand theory? its quite confused from my lecture notes.thanks......

 

[Sarah168]

haha as i said to you before yvonne...WHAT THE HELL?

looks like stream 3&5 get lucky

 

[sarevok]

yes, wtf is the cournot and bertrand theory...s 1+2 and haven't done that either.

 

[yvonne_710]

yes, wtf is the cournot and bertrand theory...s 1+2 and haven't done that either.

r these 2 theories for all the ppl who learn econ1001? or only for stream4? coz i heard not all the streams cover these two stupid theories~

 

[011]

That's oligopoly, but a little too far into that topic at least for Dennis' streams. Probably a good thing.

 

[yvonne_710]

That's oligopoly, but a little too far into that topic at least for Dennis' streams. Probably a good thing.

we will have the different short answers... thats why..........errrrrrrrrrrrr.........these 2 theories will in our short answers for sure......stream 4 is always so poor.

 

[Sarah168]

Yeah, the way we were told to calculate point elasticity was:

(dQ/dP) * P/Q

where dQ/dP is the inverse of the slope of demand, so I guess that's what they meant when they were talking about inverses...though I'll probably just use the formula you guys were given from now on.

whoops. I just went through my notes again and there is something here on the slope of the curve...

p.e = ∆Q/Q divided by ∆P/P

= ∆Q/Q x ∆P/P
= ∆Q/∆P x P/Q

and ∆Q/∆P is the gradient

so inverse gradient x P/Q

why do we take the inverse?


....urgh

 

[sarevok]

I don't know why we take the inverse, I'm just rote-learning this entire course. De Roos' lecture notes just state plainly that you take the inverse.

By the way, does any one know if the deadweight loss of subsidies operate in the same way as taxes, in that the more elastic are demand/supply the larger is the deadweight loss? I'm quite sure this would be the case due to graphs I've drawn, but it would be good to have confirmation.

 

[Sarah168]

yeah, its just that its overproduction rather than underproduction

hahaha rote learning. Dennis and his love of "intuition" kinda rules out that sort of learning for me.

for elasticity though...yes. i will rote learn that damned topic

 

[kow_dude]

Is the answer for the multiple choice question 18, (a) or (b)

I'm thinking (a) because i worked out the output = 8, and profit = $32

I'm also thinking (b) because output is also 8. I have no idea how to calculate deadweight loss but in the textbook, it says there is no deadweight loss in perfect price discrimination.

EDIT: Actually.... now i think it's (d)

EDIT: It has to be (d) !!!

 

[sarevok]

Yes, I also got d). Bit confusing at first because I couldn't work out why the 'TR-TC' method didn't work.

 

[kow_dude]

U're too good sarevok..... the answer is D! The answers for multiple choice has been posted. But here it is:

... also, for multiple choice 2, wouldnt there be a SHIFT of demand curve to the right?? Because the "successful" advertising has increased demand. Why would there be a movement up the supply curve :S

 

[sarevok]

Because demand shifts to the right, it intersects the supply curve at a higher price and quantity, thus there has been a movement up along the supply curve due to the shift in demand.

What about 14c) though, why would you implement a tariff?

 

[jpr333]

Why are you studying now this is a night before thing