Business

Economics Name Course Institution Date movement 1 Some presidential term spend (e.g. on roads) leads to an affix in productivity. a) test how an summation in such government spending shifts the PPF. extendd government spending e.g. on roads leads to an increase in aggregate demand which leads to increase in production since there a need for firms to piss more to satisfy the current demand. This shifts the production possibility limit (PPF) upwards. b) Show that welf ar can increase, and consider income and commuting cause to rate the ambiguous effects on consumption and leisure. Increase in government spending leads to an aggregate demand hence in income since at equilibrium aggregate demand is catch to income. therefore consumers entrust vex more income to spend indeed if prices of commodities have non change income depart increase their spending whether the commodities ar necessities or inferior goods but with a Giffen good spending will increase despite the change in prices and in such a case income effect will overstep the replacement effect. Question 2 Suppose a consumer earns w1/ arcminute for the graduation q hours, and w2(> w1) for any additional hours. There are no taxes to pay, and the consumer has no other source of income.

a) Draw the consumers bud engender constraint, and yield the optimal choice of consumption and leisure. Explain why the consumer would non choose to work at for q hours, or even close to q hours. [pic] The consumer will want to consume and also relax thus he will work un til where his optimal consumption, the margi! nal rate of substitution of consumption and leisure is equal to his wage rate. b) What happens when w2 increases, explaining in reasoned injury of income and substitution effects; consider the cases of (i) someone who ab initio did not work overtime and (ii) someone who initially did work overtime. i. individual who did not work overtime If W2 increases...If you want to get a all-inclusive essay, order it on our website: OrderCustomPaper.com

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