ECO 403 GDB Solution

ECO 403 GDB Solution

Semester 2011

Unemployment is an economic problem as well as a social issue.
It affects the living of all the people in a society whether they are
young or old, educated or uneducated, skilled or unskilled. Why
unemployment is increasing day by day in Pakistan? Write down at
least one reason.

Answer:

Unemployment is increasing day by day in Pakistan due to many
reasons. Reasons are job search and wage rigidity in the country.

*Job search:
1. Workers have different abilities and preferences.
2. Jobs have different skill requirements.
3. Geographic mobility of workers.
4. Flow of information is imperfect.

*Wage rigidity:
1. Minimum wage laws.
2. Labor unions.
3. Efficiency wages.

• Sectoral shifts.
• Unemployment insurance (This is for European countries)

ECO 401 Assignment # 2 Solution

ECO 401 Assignment # 2 Solution

Semester 2011

Question:

A firm operating in competitive environment faces the following price (P),quantity (Q), total fixed cost (TFC) and total variable cost (TVC) schedules respectively:

A. Calculate total revenue (TR), marginal revenue (MR), total cost (TC),marginal cost (MC) and profit (π) for each level of output (Q).

Solution:-

Q	P	TFC	TVC	TR	MR	TC	MC	π
400	2.5	150	750	1000	—	900	—	100
500	2.25	150	830	1125	1.25	980	0.8	145
600	2	150	905	1200	0.75	1055	0.75	145
700	1.75	150	995	1225	0.25	1145	0.9	80

B. Find the optimal level of output and price which maximizes firm’s profit.

 

Answer:-

           As we know that profit is maximized at the point where MC = MR. The optimal level of Output (Q) and Price (P) at which maximizes firm’s profit is 600 and 2. 

ECO 402 Assignment # 1 Solution

ECO 402 Assignment# 1Solution

Semester Spring Fall 2011

Question no 1:

a. Ali has certain amount of money and he has to spend on two goods apple and strawberries. Suppose Ali completely prefers strawberries than apple.

How you will see this particular situation in the consumer equilibrium theory?

b. Support your answer with the help of graph.

(Marks: 2+3)

Solution:

For the first question the answer is "corner solution.” As according to the corner solution ,if a consumer buys in extremes and buys all of the one category of good mean completely prefer one good over the other .In this situation the indifference curves are tangent to the horizontal and vertical exis.For the graph look in the lecture number 8 page no 50 in the topic of corner solution.

Question no 2:

Keeping in view the given data for the construction of roads from the year 2000 to year 2004, calculate the nominal price for the roads construction in each year.

Note:

Take year 2000 as base year where required.

Solution:
For question number 2 the formula is given as follows

Nominal price = CPI (current year)/CPI (base year)*Real price.
Here is the solution for the first year. Solve others by similar formula.
Nominal Price for the year 2000 = 45.5/45.5*5550

Nominal Price for the year 2000= 5550

ECO 401 Assignment # 1 Solution

ECO-401

Assignment No.01 Marks: 20

Semester Fall 2011

Question:
Suppose the market demand and market supply for Levis jeans is given by the
following equations:
Qd = 5000 – 2.5P
Qs = 4000 + 1.5P

A. Find quantity demanded when price is Rs. 250, Rs. 450 and Rs. 650.

Quantity demand is found by putting the values of P in quantity demand equation.

1. when the price is Rs.250

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(250)

Qd = 4375 units

2.when price is Rs.450

Qd = 5000 – 2.5P

Qd = 5000 – 2.5(450)
Qd = 3875 units

3.when price is Rs.650

Qd = 5000 – 2.5P
Qd = 5000 – 2.5(650)
Qd = 3375 units

B. Find quantity supplied when price is Rs. 200, Rs. 400 and Rs. 600.

Quantity supplied is found by putting the values of P in quantity supplied equation.

1. when the price is Rs.200

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(200)

Qs = 4300 units

2.when price is Rs.400

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(400)

Qs = 4600 units

3.when price is Rs.600

Qs = 4000 + 1.5P

Qs = 4000 + 1.5(600)

Qs = 4900 units

C. Find equilibrium price and equilibrium quantity with the help of above
equations.

The equilibrium price for Levis jeans is found by equating Qd and Qs.

At equilibrium,the quantity demand and quantity supply must equal

                                    Qd=Qs

                        5000 – 2.5P=  4000 + 1.5P

                        5000-4000=1.5P+2.5P

                        1000=4P

                        P=1000/4=250Rs.

Equilibrium price =Rs.250

Equilibrium quantity can found by puuting this price in equation of quatity demand or quantity supply

                                                Qs = 4000 + 1.5P

                                                Qs = 4000 + 1.5(250)

Qs = 4375 units

Note:

At equilibrium, At equilibrium,the quantity demand and quantity supply must equal

                                    Qd=Qs

Equilibrium price at 250

                        5000 – 2.5(250)=  4000 + 1.5(250)

                        4375 units=4375 units

                       

D. Show the equilibrium condition in Levis jeans market graphically.
Marks: A=3(1 for each value), B=3(1 for each value), C=8(4 for each value), D=6