assignment.

1. Because bagels and cream cheese are often eaten together, they are complements. A) We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern - a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer using the supply and demand diagrams. (You are required to draw 2 graphs, one for bagels market and the other for cheese market) You must use the graphs and explanation in the proper order (One market will show the direct effect of an increase or decrease in an input price and the second market will show the effect due to being complement to the first good) B) Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern - a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer using the supply and demand diagrams. (2 graphs, one for each market). Again use the appropriate order for markets or else marks will be deducted. 2. Pharmaceutical drugs have an inelastic demand and smartphones have an elastic demand. Suppose that technological advance happened in both markets. A) Draw the demand and supply diagrams for each market separately and show using the three steps what happens to price and quantity due to shift in the supply curve. B) Which product experiences a greater change in price? Why? Which product experiences a greater change in quantity? Why? Explain using the concept of elasticity. C) What happens to the total consumer spending on both products? Use the concept of total revenue with relation to elasticity and explain. 3. Consider public policy aimed at smoking. A) Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $15 and the government wants to reduce smoking by 30 percent, by how much should it increase the price? [Hint: Use the elasticity formula to find the answer] B) If the government permanently increases the price of cigarettes, will the policy have a greater effect on smoking one year from now or five years from now? Studies also find that teenagers have higher price elasticity than do adults. Why might this be true? Explain all the relevant details. C) Do you think COVID-19 has impacted the smoking pattern for people? Are people smoking more due to COVID-19? What are the reasons for your answer? 4. Suppose Qd = 500 - 4P and Qs = 6P A) Find Equilibrium P and Q. B) Find the price that buyers will pay and the price that sellers will receive and the quantity that will be exchanged in the market. Show all the steps with explanation to receive full marks. Hint: Modify the equations as follows: Qd = 500 - 4PB Qs = 6Ps If the tax is paid by buyer PB = Ps +T C) What is the burden of consumers? What is the burden of producers? What is the amount of total tax paid?

The gross domestic product (GDP) is the most watched of all economic indicators contained in Canada's national accounts. Visit the Statistics Canada website www.statcan.gc.ca. Locate in Canada's Economic Accounts, the summary tables for the economic series mentioned in parts (a) and (b) below; and then answer parts (c), (d), and (e).

[5 marks] Find tables for gross domestic product Expenditure Based and Income Based, annual, (Separately), at market prices or Current Prices for the years 2016 through 2020. Download and attach the data table at the end of your answers to this question. (Do NOT provide the link to the table, you will get a zero for providing the link and not attaching the actual table). (This is nominal GDP table also known as GDP at market prices)

[2 marks] Find the Real Gross Domestic Product (Real GDP), Expenditure-Based, annual, at 2012 constant prices, for the years 2016 through 2020. Download and attach the data table at the end of your answers to this question. (Providing the link to the data table will get you a grade of zero)

[5 marks] What trend do you observe in GDP at market prices (in the data that you found in a)? What trend do you observe in GDP at constant prices (in the data that you found in b)? How and why do the two series differ? Explain your answer. To show the trend, a line graph is best (you can draw it in Word or Excel) Attach the graphs directly within the question.

[5 marks] Define the GDP Deflator and using the data tables for nominal GDP (market prices) and for real GDP (constant prices), calculate the GDP deflator for each year (2016-2020). Present the data in a table for each year. Show all your work.

[5 marks] For the year 2020, calculate the values of each of the four components of GDP at market prices (Expenditure based): consumption (C), investment (I), government purchases (G), and net exports (NX). Show and explain all your calculations. Make sure to include the sub-components that are relevant to each of the four components only. It's ideal to do this in MS Excel to do the calculation easily.

[8 marks] Find the latest release about real GDP on Statistics Canada's website (3rd quarter of 2021). Explain how real GDP has changed during the 3rd quarter and what factors contributed towards the change. Provide all the relevant details including the impact of COVID.

Q1. In the Solow model, holding the size of labour force L constant, when the capital stock K increases, (a) the marginal product of capital increases;

(b) the marginal product of capital decreases;

(c) the marginal product of capital does not change;

(d) none of the above.

2. According to the Solow growth model, if the national savings rate increases:

(a) the economy will grow at a faster rate forever;

(b) the capital per worker will grow faster forever;

(c) the economy will grow at a faster rate in the short run, and a new, higher, steady state level of capital per worker will be reached;

(d) the capital per worker will eventually decline.

Short questions:

1. Here are some numbers (all in million RMB yuans) from the income account for the city of Shanghai in 2017: labor compensation = 14997, business proftis = 8780, depreciation of fixed assets = 3924, net production taxes = 5224, private consumption expenditures = 12970, government consumption expenditures = 4581, net exports = 889.

(a) Calculate Shanghai's GDP in 2017 using the income method;

(b) Calculate the labor income's share in Shanghai's GDP;

(c) Calculate the investment rate in Shanghai.

Suppose that the capital income share () of a country is 1/2, and that, over a ten year period, the country's annual growth rates of capital stock K, employment L and labor efficiency E are 10%, 2.5%, and 7% respetively.

(a) What would be the annual GDP growth rate of the country during this ten year period?

(b) If in the long-run, both the country's savings rate and the employment growth rate are constants, and the rate of technological progress is 2% a year. What would be the country's annual growth rate of GDP per worker in the long-run?