Econ 204 – Assignment 1(Total Marks: 100) Due: January 30, 2015 by 13:00pm Question 1 (20 marks) In class, we saw how real GDP has grown over time in Canada. We also learned about the expenditure components of GDP. This question will have you look at the change of the expenditure components of GDP over time. We’ll obtain data from CANSIM II: http://dc.chass.utoronto.ca/cansimts/English/ (Note: this link only works if you’re on campus or using UVic’s VPN.) Click on Direct series retrieval by label> Multiple series by label or/and range(s) of labels To keep things simple, we’ll use these series for the four main components of real GDP (V1992067): personal expenditure (V1992044), government current expenditure (V1992049), total business fixed
265). An increase in the real investment or in components of consumption will cause a rise in the real GDP and a decrease in real spending will cause a decrease in the real GDP. To calculate the multiplier one takes 1 and divides it by 1 minus the marginal propensity to consume, which is equal to one divided by the marginal propensity to save. Therefore, the “smaller the marginal propensity to save, the larger the multiplier” and the “larger the marginal propensity to consume, the larger the multiplier” (Miller, 2012, pg. 266).
Their total revenue will be subtracted from their total expense which will be their net income. The net income and revenue will be times by 100 will be the profit margin. The net income plus depreciation will equal their cash flow. D. Suppose the change had halved, rather than doubled, the firm’s depreciation expense. Now, what would be the impact on net income, total profit margin, and cash flow?
Explain your answers. a. If a firm in the industry wishes to increase total sales revenue (ignoring cost considerations), will it raise or lower its selling price? Why? The selling price would only increase because the absolute value of -2.5 is 2.5 which are greater than 1 meaning it is elastic and an increase in price leads to a reduction in total revenue.
The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent. c. The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 2 percent. d. The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent. 4. If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is a.
Question 2: There is a direct relationship between project Size and project profitability. While larger projects have a larger overhead cost they are more profitable long term. The largest 20 projects earned an average cost per project of $16,392.86 compared to the smallest 100 projects average cost per project of $10,721.43. We calculated these numbers by dividing total overhead cost allocated using the ABC method by the total number of projects. Question 3: According to the calculation and data analyzed in Question 2, the profit margin of largest 20 projects and smallest 100 projects are 44.01% and 1.86% respectively.
The bottom 60% of income recipients receive less than 30% of total income. There are economic and social advantages and disadvantages of inequitable distribution of income. Economic benefits occur when there is an increase in the productive capacity of resources and thus an increase in real GDP per capita. The first benefit is that the labour force is encouraged to increase education and skill levels. Since jobs with higher qualification
As incomes rise we consume more of normal goods such as colour televisions and less of inferior goods for example black and white televisions. As the price of both types of televisions fall the demand for both of them increases as stated by the law of demand. Price is determined by market forces; namely demand and supply. From the diagram bellow we can see that as price falls the budget constraint pivots out from BC1 to BC2 and consumption of both types on televisions increases from A1 to A2. This is because as price falls consumers can afford more goods as their real incomes increase and they feel richer.
Sales lost will be recuperated by the sale of the 10oz aerosol can and will continue to raise overall revenue. (See Appendix B- Cannibalization Rates) 7. A weighted contribution of the forecasted effects of cannibalization indicate a possible gain of almost $100,000, and this is in spite of the low estimate forecast for the 10 oz. aerosol can producing a lost. (See Appendix B- Weighted Contribution) 8.
Why is the multiplier related only to consumption spending? (5 points) The multiplier is “the number by which a permanent change in autonomous real investment or autonomous real consumption is multiplied to get the change in the equilibrium level of real GDP” (Miller, 2012, pg. 265). An increase in the real investment or in components of consumption will cause a rise in the real GDP and a decrease in real spending will cause a decrease in the real GDP. To calculate the multiplier one takes 1 and divides it by 1 minus the marginal propensity to consume, which is equal to one divided by the marginal propensity to save.