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Question # 00000780
Subject: Economics
Due on: 09/18/2013
Posted On: 09/06/2013 06:06 PM
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Macroeconomics

In economics, they say a picture is worth a thousand words. Below, you will find three scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts as requested.

Scenario One

In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices became high before this, and the supply of coffee increased substantially. In the meantime, demand for coffee and everything else remained the same. Price Level 1.

Coffee prices came down again, at first overshooting the former equilibrium price, throwing the coffee market into confusion. In the meantime, gourmet coffee houses began appearing, which began charging a premium for coffee in the period of falling prices. Price Level 2.

Gourmet coffee houses tend to open in high-rent areas and cater to higher income consumers. Because of the change they created for taste and preferences and the higher income market, the gourmet coffee houses had a win-win in a period of falling wholesale prices and increasing retail prices. Price Level 3.

But in the middle of the decade, the party was over, and wholesale prices started increasing because of some shortages caused by weather and the rising overall market prices again. Where is the new equilibrium price? Price Level 4.

Explain the changes in the supply and demand curves based on the above information. Draw a graph showing how the changes affect the price levels, supply and demand.

Scenario Two

You have been asked to discuss the differences between the microeconomic definitions of supply and demand and the macroeconomic differences of aggregate supply and demand. Discuss what determines supply and demand and aggregate supply and aggregate demand. Explain what causes movements along the curve and shifts in the curve for supply and demand and aggregate supply and aggregate demand (make sure that you include price as a variable). Include whether this is an example of the microeconomic definition of supply and demand or the macroeconomic definition of aggregate supply and demand. Most importantly, did this cause a shift in the curves or a movement along the curves? What happened to equilibrium price, supply, demand, aggregate supply or aggregate demand? Describe your graphs.

  1. After Hurricane Katrina, what happened to the price of fish?
  2. After the development of the microchip, what happened to the price of computers?
  3. After the government raised tariffs on imported cheese, what happened to the price of domestic cheese?
  4. Polyester suits have become trendy again. What happens to their price?
  5. Internet auction sites are becoming more popular, and people are using them more and more.
  6. An new health report came out that said red wine lowers cholesterol.
  7. The government raises taxes.
  8. Inflation increases.
  9. Immigration laws are relaxed.
  10. The government increases spending.

Scenario Three

The PPF curve shows the economic choices a country can make about production given scarce resources, a given technology, and a given quantity of inputs. Assume you are a developing country, producing food and clothing at maximum capacity. What could happen when foreign investors start investing in your country?

Discuss what type of foreign investments would be best for the economy’s PPF. What are the opportunity costs of these decisions?

Include what will happen to private and public choices as the economy grows. Support your discussion of these issues and consequences using at least 2 graphs.

1,000–1,600 words + graphs

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In economics, they say a picture is worth a thousand words

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Preview: again xxxxx greater xxxxxxxxx demand due xx which the xxxxxxxxxxx price xxxxx xxx moved xxxxxxx along the xxxxxxxxx supply curve xxxxxxxxxxx laws xxx xxxxxxx results xx increased labour xxxxxx in the xxxxxxx thereby xxxxxxxxx xx greater xxxxxxxxxx and thus xx upward movement xx the xxxxxxxxx xxxxxx curve xxx since more xxxxxx means greater xxxxxxxxxx incomes, xx xxxxx greater xxxxxxxxx demand and xxxx the aggregate xxxxxx curve xxxxxx xxxxxxx the xxxxx and the xxxxxxxxxxx price level xxxxx upward xx xxx aggregate xxxxxx curve Government xxxxxxxxxx spending means xxxxxxx investment xxxxxxxxx xx higher xxxxxxxxx demand and xxxx equilibrium price xxxxx moves xxxxxx xx the xxxxxxxxx supply curve xxxxxxxx 3 SOLUTIONS xxxx foreign xxxxxxxxx xxxxx investing xx an economy, xx means that xxxxxxx capital xx xxxxxxxxxx is xxxxxx in the xxxxxxx There will xx two xxxxx xx the xxxxx case (Fig x 1), if xxxx production xx xxxx capital xxxxxxxxx or technology xxxxxxxxx than clothes, xxxx since xxxxx xx more xxxxxxxxxxxxxxxxxx available now, xxxxxxxxxx possibilities will xx greater xxx xxx more xxxxxxx intensive good x e food xxx hence, xxx xxxxxxxxxx Possibility xxxxxxxx curve will xxxxx more on xxx food xxxx xx the xxxxx hand, if xxxxxxx are more xxxxxxxxxxxxxxxxxx intensive, xxxx xxx PPF xxxxx will shift xxxxxxx along the xxxxxxx axis xx xxx second xxxx (Fig 3 xxx which is x rarity xx x real xxxx scenario, if xxxx clothes and xxxx are xxxxxxx xxxxxxxxxxxxxxxxxx intensive, xxxx there are xxxxx possibilities for xxxxxxxxxx the xxxxxxxxxx xx both xxxx and clothes xxx thus, the xxxxx curve xxxx xxxxx outward xxxxxxxx to the xxxxxxxx curve Fig x 1 xxx x 2 xx graph, F xxxx C Clothes xxx best xxxx xx foreign xxxxxxxxxx for the xxxxxxx of the xxxxxxxxxx country xxxx xx either xxx investment of xxxxxxx or the xxxxxxxxxx of x xxx technology xx since it xx a developing xxxxxxxx its xxxxxxx xxxxx of xxxxxxx and technological xxxxxxx will be xxxxx as xxxxxxxx xx developed xxxxxxxxx Hence, the xxxxxxxxxx of capital xx technology xxxx xxxxxx in xxxxxxxxxx the possibility xx producing either xxx or xxxx xxxx and xxxxxxxx Firstly, as xxxxxxxxx in the xxxxx question, xxxxxxxxx xxx of xxxx or clothing xx capital intensive, xxxxxxx capital xxxxxxxxxx xxxx result xx increasing the xxxxxxxxxxx of that xxxx and xxxxxxx xxxx be xxxx if technology xx invested However, xx one.....
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