Business

Economics Name Course Institution Date motility 1 Some presidential term spend (e.g. on roads) leads to an affix in productivity. a) test how an profit in much(prenominal) government expenditure shifts the PPF. gaind 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 sustain more to satisfy the current demand. This shifts the production possibility enclosure (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 so in income since at equilibrium aggregate demand is adjoin to income. therefore consumers entrust vex more income to spend therefore if prices of commodities have non change income for seduce increase their spending whether the commodities atomic number 18 ne cessities or inferior goods but with a Giffen good spending will increase despite the change in prices and in such a case income effect will scale the replacement effect. Question 2 Suppose a consumer earns w1/ hr 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 budget constraint, and yield the optimal choice of consumption and leisure. Explain why the consumer would non choose to browse for q hours, or even close to q hours. [pic] The consumer will want to consume and also relax thus he will wo rk until where his optimal consumption, the ! marginal rate of substitution of consumption and leisure is equal to his wage rate. b) What happens when w2 increases, explaining in licit injury of income and substitution effects; consider the cases of (i) someone who initially 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: BestEssayCheap.com

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