ARE 2150 Study Guide - Midterm Guide: Substitute Good, Perfect Competition, Microeconomics

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cerisecrow681

29 Jan 2020

School

UConn

Department

Agricultural and Resource Economics

Course

ARE 2150

Professor

Emma Bojinova

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Document Summary

Practice questions for chapter 1: the nominal price of milk was . 25 in 1998 while the cpi was 163. 0 that year. What was the real value of 1998 milk in terms of 1970 dollars: the nominal price of a 1990 laptop was ,500 and the cpi that year was 130. 7. The nominal price of a laptop in 2010 was and the cpi that year was 218. 1. By what percent has the real price of laptops changed: suppose you are in charge of product pricing and marketing strategy for a pharmaceutical company. Economic theories are developed to explain observed phenomena by deducing from a set of basic rules and assumptions. Demand: p = 40 - 5q: answer: p=25 and q=3 (to solve set supply and demand equal to each other and solve: 10 + 5q = 40 - 5q, assume yugos( a type of car) are inferior goods.

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3. Refer to the following data on the U.S. consumer price index and answer the questions below.

Year CPI Year CPI Year CPI Year CPI

1988 118.3 1993 144.5 1998 163.0 2003 184.0

1989 124.0 1994 148.2 1999 166.6 2004 188.9

1990 130.7 1995 152.4 2000 172.2 2005 195.3

1991 136.2 1996 156.9 2001 177.1 2006 201.8

1992 140.3 1997 160.5 2002 179.9

a. Compute the inflation rate for each year 1989-2006.

b. Which years were years of inflation? What do you expect to happen to real interest rates during this time period if nominal rates remain unchanged?

c. In which years did deflation occur? What do you expect to happen to real interest rates during this time period if nominal rates remain unchanged?

d. In which years did disinflation occur?

greenmallard637

Below are some income and Consumer Price Index data for Bill living in Utopian. (Utopian calculates CPI numbers the same was done by the USA.)

Year	Billâs Nominal Income	CPI
2010	$70,000	218.1
2011	$71,000	224.9
2012	$72,000	229.6

(a) Using the base year as the comparison year, calculate the Real Value of Bill's Income for 2010 measured in base-year dollars. Please show the work done to get your answer. Please calculate your answer to the nearest dollar.

(b) Using the base year as the comparison year, calculate the Real Value of Bill's Income for 2011 measured in base-year dollars. Please show the work done to get your answer. Please calculate your answer to the nearest dollar.

(c) Using the base year as the comparison year, calculate the Real Value of Bill's Income for 2012 measured in base-year dollars. Please show the work done to get your answer. Please calculate your answer to the nearest dollar.

(d) In what year was Bill's Real Income the highest?

(e) Using the information above calculate the inflation rate from 2010 to 2011. Please show the work done to get your answer. Please calculate your answer to the second decimal place (hundredths place)

(f) In one factual sentence please state what information your answer the inflation rate in (e) above tells us. (I did not want any opinion of whether you think your answer is high or low.)

(g) If Sue lent Bill $20,000 at the start of 2010 for 1 year and charged Bill a nominal interest rate of 4.00%, then please calculate the real interest rate that Sue earned for this 1-year loan. Please show how you got your answer. Please calculate your answer to the second decimal place (hundredths place)

(h) If Sue wanted to earn a real interest rate (return) of 4.00% for the loan mentioned in (g) above, then what nominal interest rate should she have charged Bill? Please show how you got your answer. Please calculate your answer to the second decimal place (hundredths place).

graymammoth84

1) Assume there is a simple economy where people consume only 2 goods, food, and clothing. Further, assume that the market basket of goods used to compute the CPI consists of 100 units of food and 20 units of clothing.

	Food	Clothing
2004 price per unit	$8	$20
2005 price per unit	$12	$40

Compute the percentage changes in the price of food and the percentage change in the price of clothing between 2004 and 2005.

Calculate the percentage change in the CPI between 2004 and 2005.

Do you think the CPI price changes affect all consumers in the economy to the same extent? Explain.

2) Calculate how much each of the following items is worth in terms of today's dollars using 180 as the price index for today.

a. In 1925, the CPI was 18 and the price of a movie ticket was $0.30.

b. In 1930, the CPI was 14 and a cook earned $20 a week.

c. In 1940, the CPI was 16 and a gallon of gas cost $0.20.

3) The table below uses data for 3 hypothetical countries. All the number values are in thousands. Complete the blank entries in the table below.

Country	Adult Population	Labor Force	Employed	Unemployed	Unemployment Rate	Labor-Force Participation Rate
A	120,000		60,000	4,500
B		28,000		3,000		60
C	70,000	40,000			10

4) The following table indicates U.S. real GDP data. Calculate real GDP per person for 1987 and 2005. Then use real GDP per capita to compute the percentage change in real GDP per person from 1987 to 2005.

Year

Real GDP (2000 prices)

(in million)

Population

(in million)

1987

$6,435,000

243

2005

$11,092,000

296.6

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ARE 2150 Study Guide - Midterm Guide: Substitute Good, Perfect Competition, Microeconomics

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