eco009

Show, by means of a labelled diagram, the market demand and supply curves for games consoles e.g. Xbox, PlayStation, Nintendo DS. Identify and explain the market equilibrium position. (ii) Explain, with the aid of a separate diagram in each case, the effects which each of the following is most likely to have on the above equilibrium position: 50% reduction in the price of computer games used with the games console; Government introduce a 2% levy (tax) on all income earned. (30 marks) (b) (i) Define income elasticity of demand and price elasticity of demand. (ii) Which figure stated below is most likely to represent each of the following: Income elasticity of demand for low price cuts of meat; Income elasticity of demand for Apple iPhones; Price elasticity of demand for Petrol. - 1.6 - 0.1 + 4.3 Give reasons for your choice in each case. (30 marks) (c) Assume Income elasticity of demand for games consoles is + 2.5 and total sales in 2008 were 100,000 units. 2. (a) (i) State and explain the assumptions underlying the theory of imperfect competition. (ii) Outline the advantages imperfect competition may offer consumers. (30 marks) (b) Explain with the aid of a diagram in each case the conditions for a profit maximising firm to be in equilibrium under imperfect competition: (i) in the short run; (ii) in the long run. (30 marks) (c) 'Major food retailers in the Irish market, such as Aldi, Dunnes, SuperValu and Tesco operate under conditions of Imperfect Competition'. Do you agree with this statement? Give reasons for your answer, referring to major food retailers in the Irish market mentioned above. (15 marks) [75 marks] Page 5 of 8 Z X Y AC Quantity Unit Cost MC 3. (a) The Short Run Average Cost (AC) of a firm is usually shown as a U-shaped curve. (i) State and explain the reason(s) for the shape of the AC curve: From point X to Y; From point Y to Z.

(ii) Explain the relationship between the Marginal Cost (MC) and Average Cost (AC) curves as shown above. (25 marks) (b) 'The shape of a Long Run Average Cost (LRAC) curve is determined by economies and diseconomies of scale'. (i) Explain this statement, with the aid of a clearly labelled diagram. (ii) Define Internal Economies of Scale and External Economies of Scale. (iii) State and explain two examples of each economy. (30 marks) (c) 'The Irish government should encourage initiatives that will prevent further cost increases and in turn sustain employment in small firms'. Suggest with reasons actions the government could take to improve the competitiveness of small firms. (20 marks) [75 marks] 4. (a) 'Banks may fail by over-extending their loan book'. Explain this statement within the context of a bank's twin requirements of liquidity and profitability. (25 marks) (b) Keynes' concept of 'Liquidity Preference' is based on three reasons why people desire to hold wealth in money form. (i) State and explain each of these reasons. (ii) Discuss the effect a fall in interest rates is generally expected to have on each of these reasons. (30 marks) (c) Outline how the recent tightening (reduction) in the availability of credit may affect: (i) The Irish Motor Industry; (ii) Inflation; (iii) Ireland's Balance of Payments. (20 marks) [75 marks] Page 6 of 8 5. (a) The following table shows the level of National Income its Consumption, Investment and Export components at the end of periods 1 and 2, and the level of Imports at the end of period 1. (For the purpose of this question you may ignore the Government sector).

National Income Consumption Investment Exports Imports Period 1 40,000 30,000 15,000 15,000 20,000 Period 2 50,000 39,000 18,000 21,000 ? Calculate the following, showing all your workings: (i) Level of imports at the end of period 2; (ii) Level of savings at the end of period 2; (iii) Marginal Propensity to Consume (MPC); (iv) Size of the Multiplier. (20 marks) (b) 'Ireland is described as a small open economy and this affects the government's ability to influence the level of aggregate demand in the country'. Explain this statement, using the Circular Flow of Income diagram to support your answer. (30 marks) (c) Outline the limitations of using Gross National Product at Current Market Prices when comparing the average standard of living between two different years. (25 marks) [75 marks] 6. (a) Define each of the following terms: (i) Current Budget Deficit; (ii) Exchequer Borrowing Requirement; (iii) Public Sector Borrowing Requirement; (iv) National Debt. (20 marks) (b) Ireland's National Debt grew from 36bn at end of 2006 to 50.4bn at end of 2008. (i) Outline the major reasons for the increase in National Debt. (ii) Describe the economic consequences (positive and negative) of the increase in National Debt in recent years. (35 marks) (c) The Irish economy will experience a substantial Current Budget Deficit for 2009. You have been employed as an Economic Advisor to the Minister for Finance. (i) State and explain two specific courses of action (one on the revenue side and one on the expenditure side of the Government Account) you would advise the Minister to take in order to reduce significantly the Current Budget Deficit. (ii) Outline the possible economic effect(s) of each course of action you have chosen. (20 marks) [75 marks] Page 7 of 8 7. (a) The 'Law of Comparative Advantage' suggests that specialisation and trade increases world output. (i) Explain the meaning of the underlined term in the context of international trade. (ii) Identify the main assumptions underlying this law. (iii) Identify two sources of comparative advantage for the Irish economy. (30 marks) (b) Ireland is a small open economy which relies very heavily on international trade. (i) Discuss the importance of international trade to the Irish economy. (ii) Are there any economic justifications for a government intervening in order to restrict international trade? Outline reasons for your answer. (30 marks) (c) Write a brief note on David Ricardo's contributions to economic thought. (15 marks) [75 marks] 8. (a) Discuss the factors that influence the size of the Irish labour force. (20 marks) (b) 'According to the Quarterly National Household Survey (QNHS) the rate of unemployment was 7.7% in December 2008'. (i) Name a source, other than QNHS, for unemployment statistics in Ireland. (ii) State, with reasons, which of the measurements of unemployment used by each of these sources gives the most accurate estimate of Irish unemployment. (15 marks) (c) (i) Outline the major causes of the recent increases in unemployment in the Irish economy. (ii) Discuss economic policies which the Irish government might pursue in order to reduce the level of unemployment.

Problem 1 The purpose of this recitation is to familiarize students with a variety of integer programming modeling techniques as described in the IP Formulation Guide and in the powerpoint tutorial on IP formulations. We start with an integer program IP1 defined as follows: max 21x1 + 32x2 + 40x3 + 49x4 + 57x5 + +71x6 + 82x7 + 91x8 + 100x9 + 109x10 s.t.: 2x1 + 3x2 + 4x3 + 5x4 + 6x5 + +7x6 + 8x7 + 9x8 + 10x9 + 11x10 900 i = 1, . . . , 3 xi {0, 1} i = 4, . . . , 10 0 xi 100. (IP1) For each of the parts below, you are to add constraint(s) and possibly variables to ensure that the logical condition is satisfied by the integer program. Each part is independent; that is, no part depends on the parts preceding it. You do not need to repeat the integer programming objective or constraints given above. You may use the big M method for formulating constraint when it is appropriate. (a) (4 points) Write a single linear constraint that is equivalent to the statement "If x1 = 1, then x2 = 0."

Problem 1 You create your own start-up company that caters high-quality organic food directly to a number of customers. You receive a number of tentative orders and you now have to tell your customers which orders you are going to take. Before embarking on this journey, you first want to allocate your production capabilities in order to devise a feasible daily production plan that maximizes your profit. There are only three different kinds of food that you offer at this early stage of the company: Hummus (H) with garlic pitas, an excellent Moussaka (M), and a traditional Tabouleh (T) with parsley and mint. Each meal has to be cooked, packaged and delivered. Each operation is run by yourself. You have to deliver between 12PM and 2PM everyday, and the food is made on the same day, therefore you estimate that the total number of available cooking hours is 4, the total number of packaging hours is 2, and the total number of delivery hours is 2. Cooking sufficient Hummus for 10 portions requires 1 hour of time, packaging is done at the rate of 20 portions per hour, and delivery at the rate of 30 per hour. The cost of the ingredients for 1 portion is $1, and each packaged portion can be sold for $7. Moussaka takes more time to prepare: in one hour, the food cooking team can prepare 5 portions. Packaging is done at the rate of 15 portions per hour. Since the Moussaka has to be delivered while still warm out of the oven, it is delivered in smaller batches, therefore only 15 portions can be delivered in one hour. The cost of the ingredients for 1 portion is $2, and it can be sold for $12. Finally, Tabouleh can be prepared at the rate of 15 portions per hour, it can be packaged at the rate of 25 portions per hour, and delivered at the rate of 30 per hour. Tabouleh is very inexpensive and one portion only costs $0.5 in raw ingredients, and can be sold for $5. Customers expressed interest in having the following products delivered every day: 20 Hummus meals, 10 Moussaka meals, and 30 Tabouleh meals.