ECON 202 PSUSA Demand and Supply Model Questionnaire

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HW#1- ECON 202
127-Taif Mohammed 21602171
Price ($)
1.Answer the following questions based on the demand and supply model for a business firm producing
motorcycles. Assume that 427 motorcycles is the optimal and most profitable level of production
for the firm. All dollars are in thousands.
S
30
20
10
DL
0
DM
DH
427
Motorcycle
s
(a) What are the equilibrium price and quantity at the medium level of demand (DM)?
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(b) What will be the equilibrium price and quantity if there is a demand shock that unexpectedly
lowers demand (DL)?
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(c) What will be the equilibrium price and quantity if there is a demand shock that unexpectedly
increases demand (DH)?
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(d) What can you conclude will happen to prices and output when this model is shocked by changes
in demand?
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2. Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are
in billions.
$ 194.2
Consumption of employees
U.S. exports of goods and services
30.5
24.5
Consumption of fixed capital
46.7
Government purchases
Taxes on production and imports
14.4
Net private domestic investment
39.4
Transfer payments
13.9
U.S. Imports of goods and services
17.5
Personal taxes
40.5
Net foreign factor income
14.9
Personal consumption expenditure
231.8
0
Statistical discrepancy
a)
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b)
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c)
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3. A small economy starts the year with $1012700 in capital. During the course of the year, gross investment is
$162700and depreciation is $51000. How big is the economy’s stock of capital at the end of the year?
_____________________________________________________________________________
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4. The following data show nominal GDP and the appropriate price index for several years. Compute
real GDP for each year and indicate whether you have “inflated” or “deflated” nominal GDP in
finding real GDP. All GDP are in billions.
Real GDP
Inflated (I)
Deflated (D)
230
_____
_____
243
231
_____
_____
3
180
212
_____
_____
4
276
223
_____
_____
103
_____
_____
129
_____
_____
Nominal GDP
Price level index
1
$230
2
Year
5
6
229
93

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Explanation & Answer:
4 Questions

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economics

equilibrium price

Demand and Supply Model

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