Questions On Economics And Finance

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ECON1009 – INTRODUCTORY ECONOMICS AND FINANCE SP2, 2016 Answer ALL the questions, as listed below, following the instructions provided in the Course Outline (Assessment #3 - Take Home Examination, pages 9-10). QUESTION 1 Using appropriate diagrams, discuss how an increase or an improvement in the following non-price determinants of supply would change equilibrium prices and quantities. (a) Technology, (b) Input/resource prices, (c) Taxes and subsidies, and (d) Expectations of producers. (4*5=20 Marks) QUESTION 2 Suppose South Australian consumers’ average incomes increase from $3,000 to $3,400 per month, which then results in an increase in the quantity of smartphones demanded from 15,000 to18,500. You are required to do the following: (a) Calculate the income elasticity of demand (Ey), (b) Interpret the income elasticity of demand coefficient, and (c) Explain whether smartphone is a normal good or a luxury good or an inferior good and why? (10+5+5=20 marks) QUESTION 3 (a) What is ‘demand-pull’ inflation and how does it differ from ‘cost-push’ inflation? Demand-pull inflation is the term used to describe (b) When the economy approaches full employment, why does demand-pull inflation become a problem? (10+10=20 marks) QUESTION 4 Using the following ATO tax rates for 2015-2016 calculate: (a) How much tax a person would pay with a gross income of $100,000 and expenses of $1,500 for vehicle and travel; $500 for clothing, laundry and dry-cleaning; $200 for gifts and
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