eCoNoMiCs FoRuM

yahoo groups

2006-03-17T08:35:00.000+08:00

S0rry, the previous entry dun seem to be able to load, but anyway, details on the previous blog:

Common Test 1 2006

Hi folks!Just to remind you guys that I have uploaded soft copies of economic notes / materials on
http://groups.yahoo.com/group/econsengin/
and you have to sign up as a member to gain access.Anyway, I will be in school on wed and fri from 8am to 12pm. Please arrange with me if you are coming down to seek consultation so that I can stagger slots with different students. Better if you are coming down in groups. If not, you can post FAQs, and I will try to answer them online.Cheers, have a good break!eNgin

Common Test 1 2006

2006-03-15T11:30:00.000+08:00

Hi folks!

Just to remind you guys that I have uploaded soft copies of economic notes / materials on

http://groups.yahoo.com/group/econsengin/

and you have to sign up as a member to gain access.

Anyway, I will be in school on wed and fri from 8am to 12pm. Please arrange with me if you are coming down to seek consultation so that I can stagger slots with different students. Better if you are coming down in groups. If not, you can post FAQs, and I will try to answer them online.

Cheers, have a good break!

eNgin

Promos 2005

2005-10-04T13:59:00.000+08:00

Hi Folks!

Just a last minute message to u guys.......

Good Luck for Paper 2 and 3 tomoro...dun wurry....its relatively an easy paper. if u had pay attention to every single tutorial and lecture...i dun think u will have any problems.

and remember to choose question wisely!!! dun repeat the mistakes i have told u guys ...

and i will see u guys tomoro...all e best!!!

luv,

ms ngin!!!

2004 promos ans

2005-09-30T15:41:00.000+08:00

2004 MCQ ans

(1-10) c b b b c d d c a a
(11-20) c c d b c d a b d b

Market Failure MCQ
Q4 (P111)

in this case, it creates a negative externality in production, such that MSC>MPC.
Thus, as demand side is not affected, MSB=MPB=2

without tax, production will occur at output =152, where MPC=MPB

the socially optimal out will be at 92, where MSC=MSB=2, and you get MSC by summing MEC (marginal value of smoke nuisance) and MPC.

thus, optimal tax in a pc market, will be where tax=mec=0.80.

Q6 (112)

to measure which project will be the most desirable, you have to look into the total benefits and costs of the 3 projects.

benefit= private benefit plus positive externalities
cost= private cost plus negative externalities.

subtract cost from benefit, and the most desirable project will be the one with the highest nett benefit, which is project 3, with nett of +35.

Next, i would like to bring your attention to a common error.
Never never write in your essay, PC labour INDUSTRY max profits where MRP cuts AFC!!!!
PC industry dun max profits, pc firm does! wage determination for a pc labour industry takes place where demand= supply, which just happens that (MRP=dd), (AFC=SS), but only a firm takes into account its costs sides and revenue side. monopsonist has MRP, AFC etc because it is both an industry as well as a firm.

to sum up, pc industry dd=ss. PC firm MRP=MFC.
Monopsonist. MRP=MFC, but wAFC .

good luck!
mam is now involved in that stupid mitubishi lancer ahbeng case, and may have to go to court, whilst doing the promos marking....

what luck....

okie, God Bless me and you.....=)

Wages queries

2005-09-26T08:27:00.000+08:00

i understand that the MRP theory takes into account heterogeneous > labour and all that, but why does the notes say that the theory > assumes PC factor and product markets, and that labour is homogeneous? > is it contradictory? > > and why exactly is W=MRP efficient in the labour market? for a > monopsonist, since he can hire at W quantity of labour, then how is efficiency affected? productivity of > workers decrease because they receive less pay? i'm not too sure, > please explain. thank you!

Like what I have said, the assumptions in the lecture notes is to start out by doing the most idealistic case where all the labour is homogeneous, and all jobs are equally attractive, then one wage rate will prevail. this is to guide newbies for this chapter, instead of jumpstarting into the complexity of wage differential. remember i mention in the lecture , will the theory hold true if the assumptions are relaxed etc?

refer to john sloman; there is this section that explains wage differentials in a perfectly competitive labour market. the best distinction between the case of a pc labour and an imperfect one would be the case if the firms are wage-takers or wage setters.

w=MRP is the "benchmark" for efficiency in the labour market, as it is the case where workers are paid according to their productivity, and they receive what they ought to earn. it is kinda "fair-rate of return" to both workers and the firms. when w is less than MRP, firms benefit at the expense of workers, and total income could have increased to the point of PC equilibrium, where no. of workers hired is at its optimal, and paid according to their productivity.

The Study Break

2005-09-24T12:45:00.000+08:00

For those who did not attend the make-up session today, do note there is one whole stack of notes that u should get. in total, about 5 sets.

For those who handed in ur essays after Monday (i.e. LATE), i will put your essays in the class pigeon hole. ECons rep, please check the class pigeon hole on the day of your GP paper, to collect whatever notes or marked assignments for your class. the rest of the class, remember to collect the notes after the paper, so that u have the stuffs to read over the weekend.

consultation hours will be 8am to 12pm from 26/09 to 27/09. Try to come in groups, so that the waiting time for each individual person/grp is shortened. clarify stuffs with ur peers first, and when there are common doubts, then seek me...=)...

Hmm...in order to prevent overlapping of consultation hours, maybe u can arranged via this blogspot to tell me what time u r coming, which class etc, so that others can be informed, and choose to come at another slot. ideally, max time given to each individual or grp is about half an hour. so that i can answered different groups' queries.

those whose essays scored 18 and above, or marked with an asterik on the first page, please type out ur essays n email me at ngin_yuet_ling_eileen@moe.edu.sg for sharing purposes.

Okie, and some common MCQ asked:

P110 Q8: transfer payment is a macroeconomic concept, which refers to income for which no good or service has been provided in exchange. E.g. Welfare payment, unemployment benefits etc. this income is received by individuals, though the individual did not produce any goods or services, simply a transfer from one to another. U will learn more about this next year.

U can try the MCQs in Market Failure at ur own initiative, though we have no time to go through it.

And remember! it is expected that u guys can score on average a B for economics! =) Get all the marks u can get from MCQ and DRQ, essays dun panic, and remember to ANSWER the question, instead of furiously writing whatever u have memorised. remember to plan a structure that can best answer the question (like a flowchart) and consistently link ur points back to question, not just simply regurgitating everything in the lecture notes. at least, get beyond a 12 or 13 for essay, then u can still get a B....=)

Okie, all the best and m'am is behind u....and seriously i really hope u guys have benefitted from the lessons....=)

Cheerios,
Ms Ngin

Annoucements

2005-09-13T09:15:00.000+08:00

Term 4 Economics Lesson Strategic Planning

“Time is no friend.”

In view of time constraint, the following is the plan for economics lessons before your promos.

1. There will be a make-up lesson this Saturday 17/09, from 8am to 11am, at LT3. We will go though the post-mortems of the 6 essays questions in Market Structure tutorial. Students should look through the remaining 5 questions that they did not attempt, and do outlines for them, so that when I go through the problems, you have an understanding of what’s going on. Good scripts will also be printed, if there are no violent objections from you. =)

Notes and marked scripts will be returned.

2. Essay Assignment for Wages Tutorial:

Question 2: “The level of wage rates is not satisfactorily explained by economic theory because the theory concentrates on perfect competition while most labour markets are imperfect.” Discuss this assertion. (25m)

OR

Question 4 Trade union activities will always lead to a more efficient outcome in the labour market. Discuss this assertion.

Deadline: Next Monday 19/09.

Word Restriction: Typed – max 1200 words; written: 4 sides of a foolscap, excluding diagrams. Any extra words will not be marked! Learn to write under timed condition of 45 minutes!

Penalty of one mark per day for late assignments.

3. Structure for the next 3 weeks

Ø Week 1: MCQ
Ø Week 2: DRQ. Focus on Q2 (p279) and Q3 (P.247). If time, go through Q1 and Q4.
Ø Week 3: Essays. Q1 and Q3 will be discussed in class. Q5 outline will be given. Post mortem of Q2 and Q4 will be done.

In view of the study break in 3rd break, we have to do a make-up AGAIN! will be doing post-mortem on wages essay. i have booked LT4, 9am to 12pm, at LT4 on 24/09 (Sat) for the session.

Notes and marked scripts will be returned.

4. Remedial Program

Ø Week 1: Market Structure review – Concepts. T/F questions, worksheet, and MCQ answers to Promos 2004. An essay to be done and submitted before 2nd week. A DRQ on market structure to be attempted.
Ø Week 2: Post-mortem of essay and DRQ.
Ø Week 3: TBC. Contingent on performance. Consultation session. Feel free to raise doubts. Check blogspot for FAQs.*

*again, no session in week 3, in view of the study break. Please study hard, will be available for consulation from Mon (26) to Wed (28).

cheerios!

handling "evaluation"

2005-09-09T12:52:00.000+08:00

hi guys,

anyway, i have enabled any users to post comments, so no longer do u have to be a blogger to ask questions....hehe...

okie, another query:

Anyway, DRQ is still a big problem for me. Sometimes I do not know which information to use, and do not know how to select the appropriate information to evaluate. For example in the mininum wage question they ask for what the possible impact of the change in economic status.. I feel that I can use every stastic but still have no confident to evaluate well.. > Maybe I did not manage to present my problem clearly as well..

not to worry, u r not the only one with this problem...as u should have realised by now...each drq evaluation is a case-by-case basis, never a one-size fits all...and thats why i said its the highest order thinking skill...u can never say there is a standard format...

but like what i say, usually u have to do a balanced analysis, then judging by the context, u might want to weigh the pros vs. cons...and do a final evalution. Each situation is unique...and u will really have to evaluation the context, is there any limitations to the data, the conclusion? or are there any other possibilities?

we would love to see students thinking out of the box ( and still stay relevant!!!) in essays especially. good application of theory into a context is the key. some students merely regurgitate lecture notes, others merely evaluate freely witout any reference to economics. at times, with extra general knowledge to quote as examples, it does help to distinguish the normal candidates from the outstanding ones.

however, do note, some of u guys are inquisitive, which is good, but u like to use too advanced theories which u may not necessarily grasp well.and when u try to use these extra information into ur answers, it puts off examiners off, unless u have shown that ur foundation and fundamental understanding is strong. otherwise, stick on to whats required in ur syllabus, but give good examples to support ur claims.

one way is to read relevant economics articles, and see how these writers manage to bring the ideas and concepts across, but beware, no informal language. afterall u r still an A level student, not a researcher who is hypothesizing a theory....

writing a good economics essay or evaluation is an art, it takes practice, and to a certain extent, a flair. but that does not mean u cant do well if u have no flair. what is lacking in most of the students, is not really even evaluation, but the mastery to explain and elaborate a concept well. and there are many other technical faults which i find in essays, like bad or irrelevant diagrams, incoherent argument, bad organisation, the worst, not answering the question.

it takes time, but im sure u guys can do it, if u r conscientious and u put in the effort to do so. willpower is the key....=)

cheerios

ngin

Queries answered

2005-09-09T10:43:00.000+08:00

Okie, I have combined the queries from the blog and email, and hopefully i can clarify the doubts u have. =)

i'm not clear why the demand curve for labour is thedownward sloping portion of the MRP curve. could you explain?

Now, remember that the demand curve must tell u the quantity demanded at each price? Similarly, the demand for labour must tell u the quantity hired at each wage rate. If you look at your lecture notes, page 5, u realise that with profit maximising objective, the firm will hire where MRP=MFC. Therefore, at w1, though there are 2 intersection points, but eventually, the labour hired will be at q1, and not the previous point, as the profits can still increase when I hire more workers from the first intersection point. Similarly, at w2, workers hired will be at q2. thus, you realise the downward sloping portion of the MRP curve can actually pinpoint the exact quantity of labour the firm hired at each wage rate. Thus, it is effectively the demand curve for labour!

(pg 105, 8.2 q9) what does an increase in labour productivity result in? would MPP become steeper as each additional worker can produce more units of o/p or will the max pt (onset of LDR) be delayed hence the MPP will shift right?

You are right to state that MPP would increase, and hence for a constant MR, MRP=MPP X MR would increase, and therefore, the MRP curve (which is the demand curve for labour for a PC labour market) would shift to the right. I.e. At each individual wage rate, the quantity of labour hired is larger.

(p6 109, 8.2 q26) why would labour costs constituting a large fraction of firm's costs result in greatest likelihood of wage increase by joining a trade union? shouldn't the firm enjoying monopsony power be the right answer as now there is a bilateral monopoly?

Haha, this is a very good question. As I have said, there are few very problematic MCQs in Chapter 8 that I will go through in class, and this is one of them. Okie, if you look at the options, the only reasonable ones are B and D right? (A and C will only make demand for labour more elastic, and thus less bargaining power for the workers)

Lets’ examine D first. Now with a monopsony in the market, the trade union will be weaker in its bargaining power compared to a market where there is no monopsony, and thus, trade union’s bargaining power diminishes with a monopsony.

And B. Yes, lecture notes pointed out that if labour costs constitute a large fraction of total costs, then the dd for labour will be elastic. BUT in this case, since all the other options are not good, this option is the best out of the “bad” ones.

Why do I say so? The key here is that labour costs maybe a large proportion of total costs, but like the case of SIA pilots, whereby they are actually vital in the production process, then in this case, demand for labour will be pretty much be inelastic. And thus, just like the SIA pilots, they may constitute a large portion of total costs, but they are vital (unless one day, planes are fully automated without any need for pilots) thus, they will have a larger bargaining power.

(p100, 8.1 q2)i kind of get this question n i got to the answer.. but what's the exact definition of redundancies? unemployed resources?

Yes, exactly, in this case, would refer to workers getting retrenched. Note in the context of labour, unemployment refers to a case of disequilibrium, where quantity supplied exceeds quantity demanded. But when the equilibrium quantity of labour hired is less than before, it just means that the employment is lower than before, but not unemployment increases, as quantity demanded equals quantity supplied.

(p103, 8.1 q21)i understand that MRP = MPP x MR. but why would a rise in P (=AR=MR) result in the MRP shifting right? wouldn't it be stretched upwards instead?

stretched upwards? If u plot it, u would realise the downward sloping portion of the MRP curve is higher than before, so u are kinda right to say that, but the more refined economics way would be shift up, or shift right. =)

Firstly, why is it that the supply for individual labor is perfectly elastic but then the market is upward sloping? Oh and the demand right, how is it that for pc, MFC is AFC when it'd downward sloping but then in monopsony, they're different? Went through the notes but wanted to make sure I got the reason why.

Reasoning same as PC for product market. In a PC labour market, the firm is a wage-taker, thus they take the market equilibrium wage rate, and they can hire as many workers as they want at the prevailing rate. SS is perfectly elastic. But the market wage rate is effectively upward sloping, refer to lecture notes P9. The upward sloping market supply and the downward sloping demand will determine the equilibrium wage rate that the PC labour firm has to take.
Again, same reasoning as in PC product market. (just a mirror, labour is not difficult!) so, for a PC firm, since they take the prevailing market wage rate, MFC (addition to total cost) will always be constant , which is the wage rate (AFC), thus MFC=AFC. However, for a monopsony, they are wage setter, to hire more, they have to pay more, not just for the additional worker, but for the remaining workers previously hired. Thus MFC> AFC, and this is an important concept in 8.1.

what are the topics that are likely to come out for the essay questions?
thanks!

This is a good question, but there is no good answer…=P u have to use game theory approach. The optimal outcome is that u have to grasp all the topics well, but the nash equilibrium is one of a prisonners’ dilemna, where students will predict and study selectively. So whats the best prediction? The best bet would be to master the topics that are not yet covered in common test, and I seriously cannot remember the questions. It was set too long ago.

sorry that the reply came in late, had a short get-away, and just recovered from flu (not dengue!!) will be in school on friday from 9am to 1pm, and maybe saturday around 10am. Regardless will see u guys back in school on Monday....=)

thanks for all the birthday wishes and pressies, lovely! yups, and like what i always say, time is no friend, and Ms Ngin is one year older....but wiser with experience too...=)

Assignment for the Break

2005-08-30T11:23:00.000+08:00

Wages:

TYS MCQ 8.1-8.2 ( I have not covered 8.3 in lecture, u can make an attempt first)

DRQ P.279 (min wage) and P. 255 ( wage differentials)

7.5 Mcq

2005-08-29T16:37:00.000+08:00

some common queries TYS Section 7.5 (Oligopoly):

Q2: Question should be changed to :
LR eqm in MPC (not imperfect competition) requires that all firms in the industry

A: Earn no more than normal profit.

Note it should not be

"LR eqm in PC..... ", as E would be a suitable answer too. PC firm achieves PE in the LR.

Some of u thot PC firms have an equal share of the market. This is not true! Unless the question states otherwise, never was it implicated in the features of the PC firms that they should have an equal market share, because each firm has different cost functions (AC and MC)!

Rather, PC firms face the same price, (price takers) and therefore, they will produce where the MR (common to all) equals MC (different to each firm) and therefore, produce different outputs (i.e. different market shares!!) As easy as ABC ....=)

Q4 (7.5)

Note in this case, this is similar to the situation that i have illustrated to u guys about the Prisonners' dilemna (the whiteboard rubber experiment??) The firms enter a collusive agreement to max joint profits, so each is allocated a fixed output. Now to each individual firm in the cartel, it seems to them that their MR=AR is fixed at P. So if they stick to their agreement, they will produce where profits=PGNM. (optimal outcome)

However each firm has incentive to deviate from agreement (to cheat), the Nash Equilibrium with the given pay-offs. They will decide to cheat at the level where MC=MR, (at pt H), thus profits will be PHJL. In this case, the max short run increase in profits will be GHJK - LKNM. And there u have it, the answer is B! Repeated concept in Q 6.

Q7: What feature would threaten the continuation of an agreement?

a. the homogenity of a product would actually facilate collusion, as they will be "Acting" as if they are selling one common product, and therefore max joint profits.

b. with a dominant firm in the industry, it would be similar to the dominant firm collusion model, where the remaining firms follow the price set by the dominant firm.

d. significant barriers to entry would aid collusion, as the existing firms in the cartel can act to max joint profits, without worrying of new entrants, which can possibly undercut their prices.

c. Differences in cost structures will threaten the continuation of the agreement. Remember earlier topics, we have establish the premise, that firms will minimise cost by equating the MC of the different plants when allocating the output among different plants (e.g. Pg 80, TYS 7.1 Q 22). Thus if each firm in the cartel have very different MC (cost structures), e.g. in OPEC, Saudi Arabia vs. Indonesia, Saudi with a low MC will be allocated a much larger output compared to indo with a higher MC, thus smaller output. Hence, indonesia will not feel "fair" that its allocated a much smaller output compared to the rest.

THus more incentive to cheat. Hence a more similar cost structure among firms will facilitate a more equal allocation of output, thus less incentives to cheat.

Q8: Underlying assumptions of the Kinked Demand Curve theory includes:
1. No collusion
2. Homog. products (NOTE that oligopoly can sell homog. pdts!!, not just PC!!!)
3. Match P reductions, but not price increases. (reasoning pretty common sense, read up ur notes)

ANd note the Kinked Demand Curve theory has one underlying implication that Price Rigidity is prevalent under the above conditions in an oligopoly.

Limitations include that Kinked Demand Curve does not explain why the price is set in the first place, and if price changes, the theory cannot offer an explanation to it.

Hope I have answered ur queries, still unsure?? check with ur peers or me personally...

Reminder: Remedial

Every Tues 430-6 up till Term 4 Week 3 (except during the break on 06/09)
Venue: C71
Topic this tuesday (30/08): Production and Cost
Will do overview, T/F question, and we will do an essay outline. Plus sets of worksheets and notes for next session.

ANd I haven collected the funds from A01D and S06D, the reps please exert ur authority, and get the funds ready by tmr, or u have to zap ur stuffs next time.

Okie guys, rem time is no friend! so just make this last leap with ur seniors, and get promos over and done with, and u can play all u want....Just this last leap okieeE? =))

CHeers,

eNgin

Consultation During Break

2005-08-29T13:32:00.000+08:00

Hi folks!

revival of the blog during strategic periods!

Promos approaching, and I hope no one's panicking, coz all's ready to go and whack it yah?

Okie, i guess im not seeing most of u guys till after the break, and I have decided that this break will be spared for make-ups and remedials, but that doesnt mean its no ECons Time. I expect u guys to revise all the chapters from Term 1 to Term 3, esp on the chapters that have not been covered for common test.

By now, all the topics under T1 and T2 should be relatively simple to u guys, as Theory of Dd and Ss as well as production costs are essential for understanding of Market Structure, so u realise no chapters should be studied in isolation, and thats precisely the trend for GCE As, esp with less essay questions, so u should expect combination of topics in a single question or section.

During the hols, I expect u guys to attempt all the 6 DRQ questions under Market Structure, that I have no time to cover, and check ur own answers against my suggested outlines. Remember, DRQ skills have to be picked up, and this is possible only through practise! THerefore, PRACTISE! =)

When school starts again on 12th, its gonna be intensive essay skill questions, and I may decide to start on a Wage Essay Question. Some of the MCQs under Wages are quite tricky and problematic, but i dun wish to spend too much time on MCQs, so please attempt all the MCQ questions, so that we can jumpstart into it, without going thru too much overviews. I have done so much recap during lectures, so u guys shouldnt find these concepts unfamiliar. It is advisable to do mindmaps or concepts chart for each chapter, for u to identify the impt concepts under each topic that u have to know.

If u guys encountered any problems in Econs during e hols, u r welcomed to email me at ngin_yuet_ling_eileen@moe.edu.sg. I will check e mails while on hols (not regularly though)....and i will try to answer the queries as much as possible on this blog. Do check out the blog to see if ur queries are answered.

Sorry, i dun noe how to attach a tagboard with this blog, so not sure how non-users of blog can put in comments, but we will see how la....maybe u guys can help attach a tagboard or something....or not just forward me questions thru email okie?

if im coming abck to school during e hols, will update this on this blog too, so u can find me in school. If not, u can consult me after school starts yah?

alright-deos.......work hard during the break, but do rem to take good care of ur health too....and rem our ultimate goal to "jump one grade up"?? =PPP

God Bless,

Luv Ms Ngin.....

Makeup Lesson on 20/06 (mon)

2005-06-17T14:18:00.000+08:00

Reminder:

Economics Make up Lesson on 20/06 (Mon)

Venue: LT3

Time: 9am till 12pm (depending on the coverage of content)

We will be doing post-mortem on the Luxury goods essay.

Please come prepared with the tutorial on Theory of Production and Cost. I will briefly go through some of the essay outlines and DRQ question, coupled with handouts.

If time allows, I will be discussing J94 essay question on Production and Costs:

(a) Why do some firms grow in size? (15)

(b) Why do other firms remain small? (10)

Think through the essay outline for the above question.

Some of you have been asking me about the topics that are covered for common test. I will repeat for the last time:

Central Problems, Demand and Supply plus Application, Theory of Production and Cost, Market Structure (Characteristics of the 4 main market structure only)

Basically all the topics that have been taught in Term 1 and 2, but for market structure, you do not have to focus on the technical details like graphs and equilibrium positions, but you have to know the characteristics and features of the 4 respective market structures.

Okie study hard, and cya on Mon! =)

Ms Ngin

MCQ

2004-10-12T19:10:00.000+08:00

P107 Q 19 is similar to Q24.

Unit labour costs is measured by total cost of labour divide by the output produced. If the average earnings (i.e. wages) increase by less than increase in labour productivity, the numerator (total cost) will experience lower increase compared to the denominator value (output). THus mathematical derivation suggest that unit labour cost will be reduced.

Q25 of 108.

Comparing the values of output per labour hour vs. output per worker, the only reason why the latter is smaller is because there is a difference between value of labour hours and worker, since total output for both calculations should be similar.

Why the latter is smaller would suggest that the number of workers is relatively higher compared to the number of hours. THe only reason why this is possible, with respect to the given options, is that there is an increase in part time employment. As these part time employed work lesser hours, compared to a full-time employed worker.

ANswers for Q16 and 17 are B and A respectively. THere is no error in the answers at the back. Your answers are right. You mark wrongly.

Some other questions raised by students.

P. 48, Q1.
In the first year, buffer stock =0 since the eqm is at the constant price. In the second year, there is an excess of 1 mil tonne, to be stocked up. In the third year, there is an excess of 2 mil tonne, thus the resulting buffer stock is 3 mil tonne now. in the 4th year, there is a shortage of 3 mil tonne, thus buffer stock=0 as the previous years of excess are released into the market to keep it at constant price now. in the fifth year, there is a shortage of 2 mil tonnes.

question ask for maximum size of buffer stock, which will happen in the second year, when there is buffer stock of 3 mil tonnes.

P63. Q6

given AC=7000, and Q=100, we can calculate that TC=700,000.
Given AFC100-AFC101=20, we can calculate that TFC= 202, 000, since we know that TFC should be a constant. (THIS is mathematical calculation!)

From the above, we can tabulate TVC100=498000, by subtracting TFC from TC100.

Given AVC100-AVC101=10, we can derive that TVC101=501970. THus MC=TVC101-TVC100=3970.

Not a difficult question , just have to be careful and alert.

P.63 Q7

Knowing that SRMC depicts the marginal cost of the firm in the short run, with respect to a given plant size, the given shapes of the SRMC curves depicts that in the short run, if the firm wants to produce more than M, it cannot possibly do so, since the SRMC does not extends beyond M (when the usual upward sloping SRMC does allow expansion of output within the same plant size though it maybe inefficient to do so). The only way it can do so is to change the plant size to plant size 2, as depicted by SRMC2. SUch curves show that the firm has rigid physical capacity limits in the short run.

These are the commonly asked questions. THe paper will not be difficult, as long as you have been paying attention to me in class.

All the best and God Bless.

Deadweight Loss

2004-10-06T09:10:00.000+08:00

I would not favoured the statement that taxes always cause deadweight loss, as it depends on the optimal level of production and consumption. If taxes are used to correct a negative externality, then the free-market equilibrium (without taxes) will have a deadweight loss due to over production. And if tax equals to amount of MEC, then the externality is eliminated, there will not be deadweight loss.

Of course, if there is tax on a good with no externality, then there will be deadweight loss. But generally, taxes are imposed on demerit goods, to correct the negative externality itself.

Similar for the case of subsidies.

Check your diagrams in the your lecture notes.

merit goods vs. demerit goods

2004-10-05T21:21:00.000+08:00

merit goods are goods or services that have been deemed socially desirable through the political process, which arise from a divergence between the values of society and the values of individuals, the former being larger in magnitude. The divergence in value is usually because of external benefits.

Demerit goods are goods or services that have been deemed socially undesirable through the political process, are considered undesirable for the individual and society, usually due to negative externality.

distinguish between public goods and merit goods.

positive / negative externality can arise from both production and consumption, but within syllabus, you are only required to draw the diagrams of production negative externality which affect the MSC, and consumption positive externality which affect MSB. Smoking which creates negative externality, is an example of a consumption negative externality, and the diagram is not analagous to the one in your lecture notes.

Concepts Clarification

2004-10-05T10:01:00.000+08:00

Just wanna clarify some concepts.............

1. Change in quantity Demanded vs. Change in Demand

As pointed out by some students, Ced and Yed are illustrated by shifts in the demand curve, but why does the formula states percentage change in quantity demanded, over percentage change in related variable?

It is indeed true that Ced and Yed are illustrated by shifts (instead of movement along) the demand curve, however, eventually, when the demand curve shifts, ultimately we are more concerned with the eventual change in quantity demanded (reflected along the X axis) as a result of changes in income, or prices of related goods etc. (not a result of changes in price) So you need to be clear about your definition and formula.

2. Net Advantage

Reemphasizing again (and again), it is the monetary and non-monetary aspects of a job. Thus as wages increase, the monetary aspect of the job increase, hence more workers are willing to supply their quantity of labour. So it can explain why the supply of labour is upward sloping.

for those who missed the last lesson, clarify with your classmates, before seeking me. Really tired of repeating myself over and over again to different classes, and different students within a class. Study group is a good way of internalising what you have learnt (from experience)!

Anyone is free to reply to any posts and queries that others might have. Ultimately, make this a learning experience, not a place of gossips....yah.....???

All the Best for your Promos!=)

eCoNoMiCs FoRuM

2004-02-22T04:52:00.000+08:00

This shalt be the eCoNoMics Forum, where thou shalt contribute, if you could....