question archive 1)Graphically draw and explain the income effect curve: 1
1)Graphically draw and explain the income effect curve: 1
Subject:EconomicsPrice:4.01 Bought5
1)Graphically draw and explain the income effect curve: 1. Annie consumes two goods: sandwiches and coffee, with respective quantities s and C. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie's income is m. (a) Suppose m = $60. Write down Annie's budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully. (02 Marks) (b) Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve. (02 Marks) 2. Why indifference curves never intersect. Prove graphically? (1 Mark) I
2)Assignment 3. Game theory is "the study of mathematical methods of conflict and cooperation between intelligent rational decision-makers". Some applications of Game theory include, the study of oligopolies, the study of cartels and the study of military strategies. Address the following questions with suitable examples. (03* 05 = 15 Marks) (wHow Nash Equilibrium is achieved under Game Theory. [b]Find Nash Equilibrium in case of first-mover strategy. (c)Give some examples of games with two Nash Equilibriums? (d)Explain the concept of Nash Equilibrium in case of Non-Cooperative Games. (How expected Nash Equilibrium would be achieved in case of game with no Nash Equilibrium?
3) If people expect this period's inflation is equal to last period's inflation, an increase in the price of oil in the medium run will cause: O a. A reduction in output b. An increase in the real policy rate All of the answers here are correct Od Od. An increase in the price level Oe. An increase in the natural rate of unemployment Q2 Suppose the Okun's Law is: u – u(-1) = -0.5(gy – 3%). What should be the growth rate of output, Iya if the unemployment rate, u, is to be reduced by 1%? O a. 0.5% O b. All of the answers here are incorrect Oc 3% O d. 5% O e. 296 Suppose the economy is initially in the medium run equilibrium. Then the government implements an expansionary fiscal policy by reducing taxes. If people's expectations of Q3 inflation is not anchored but is equal to last period's inflation, what will be the policy interest rate, consumption, investment and inflation compared to their initial values when the medium run equilibrium is restored again such that output returns directly to its initial value without a recessionary adjustment? O a. The policy rate of interest has increased, consumption has increased, investment has decreased and a higher level of inflation ob. The policy rate of interest has decreased, consumption has increased investment has increased and the level of inflation returns to its initial value Oc The policy rate of interest has increased, consumption has increased, investment has decreased and the level of inflation returns to its initial values O d. The policy rate of interest has increased, consumption has decreased investment has increased and a lower level of inflation Oe. The policy rate of interest has decreased, consumption has increased investment has decreased, and a higher level of inflation Which one of the following statements best describes "deflation spiral"? Q4 O a. The central bank has already reduced the nominal policy rate of interest to 0%, but the real policy rate of interest remains high because expected inflation is very low Ob. The central bank has already reduced the real policy rate of interest to 0%, but the nominal policy rate of interest remains high because expected inflation is very low Oc. The central bank has already reduced the nominal policy rate of interest to 0%, but the real policy rate of interest remains high because expected inflation is very high Od. The central bank has already reduced the real policy rate of interest to 0%, but the nominal policy rate of interest remains high because expected inflation is very high All of the answers here are incorrect O e. Q5 It is easier for the central bank to keep output at potential output if expectations of inflation are: O a. All of the answers are incorrect Ob. Based on changes in the policy rate of interest Oc. Anchored Od. Changing from one period to the next Oe. Based on the last period's inflation
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1)
Answer:
a). Answer:
| Sandwiches | Coffee |
| 0 | 30 |
| 2 | 24 |
| 4 | 18 |
| 6 | 12 |
| 8 | 6 |
| 10 | 0 |
Budget line/ budget constraint
b). Answer:
When the Annie's income increases from $60 to $80 then budget line will shift right or outward.
c). Answer:
There are two features of indifference curve (IC):
1). Higher IC, refers higher satisfaction level for the consumers.
2). Any point on an IC, refers the equal level of satisfaction for the consumers.
According to the the indifference curve features,
A>C
C = B (because both are plotted on the same IC)
A = B (because both are plotted on the same IC and B is the intersection point)
So, if
C= B and A = B
then A = C
But According to the curve A>C
So, IC never intersect proof.
Graph:
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2)(a) The Nash Equilibrium is a decision-making theorem within game theory that states a player can achieve the desired outcome by not deviating from their initial strategy. ... Every player wins because everyone gets the outcome they desire.
(b) In marketing strategy, first-mover advantage(FMA) is the advantage gained by the initial ("first-moving") significant occupant of a market segment. First-mover advantage may be gained by technological leadership, or early purchase of resources.
A market participant has first-mover advantage if it is the first entrant and gains a competitive advantage through control of resources.With this advantage, first-movers can be rewarded with huge profit margins and a monopoly-like status.
(c) Examples of games with two nash equilibrium:
Example: coordination between players with different preferences
Two firms are merging into two divisions of a large firm, and have to choose the computer system to use. In the past the firms have used different systems, I and A; each prefers the system it has used in the past. They will both be better off if they use the same system then if they continue to use different systems.
We can model this situation by the following two-player strategic game.
| Player 2 | ||||||
| I | A | |||||
| Player 1 | I |
|
||||
| A |
To find the Nash equilibria, we examine each action profile in turn.
(I,I)
Neither player can increase her payoff by choosing an action different from her current one. Thus this action profile is a Nash equilibrium.
(I,A)
By choosing A rather than I, player 1 obtains a payoff of 1 rather than 0, given player 2's action. Thus this action profile is not a Nash equilibrium. [Also, player 2 can increase her payoff by choosing I rather than A.]
(A,I)
By choosing I rather than A, player 1 obtains a payoff of 2 rather than 0, given player 2's action. Thus this action profile is not a Nash equilibrium. [Also, player 2 can increase her payoff by choosing A rather than I.]
(A,A)
Neither player can increase her payoff by choosing an action different from her current one. Thus this action profile is a Nash equilibrium. We conclude that the game has two nash equilibrium.
(d) In game theory, the Nash equilibrium, named after the mathematician John Forbes Nash Jr., is a proposed solution of a outcome by not deviating from their initial strategy. ... Every player wins because everyone gets the outcome they desire.
(e) If each player has chosen a strategy—an action plan choosing its own action based on what it has seen happen so far in the game—and no player can increase its own expected payoff by changing its strategy while the other players keep theirs unchanged, then the current set of strategy choices constitutes a Nash .
3)
Question 1 . Option e is the right answer unemployed rate will increased .
Question 3. Option d is correct interest rate increses consumption decrease investment increases and low level of inflation.
Question 4. Option A is the correct answer.
