# Global Economics

Form, format, presentation, and appearance are almost as important as correct numbers. Poor presentation, in both written work (Word) and spreadsheets (Excel) is an indication of careless thinking and analysis. You cannot earn full credit, even if the solutions are correct, if your work is not presented in a professional manner.

All submitted written work should include your name, the course number, and the title of the problem set. In addition, remember that all conclusions must be supported. You should show the steps you took to arrive at your conclusion. Numbers and calculations are not self-explanatory. Your assignment should be “in good and proper form” when submitted. That means, for example, when you prepare economic information, your numbers must be aligned on the decimal and right justified. Use commas for thousands. Use underlines and dollar signs appropriately. Every answer must be properly labeled and supported with calculations in statement or schedule (table) form, as you would do in a professional setting. Do not type formulas, equations, and calculations or show math or equal signs. When finished, submit your completed problems in one file (Word or Excel) for grading and instructor feedback.

**Word file: **The cover page must include your name, course, date, unit
and assignment numbers, and problem number. Each problem must begin on a new
page with a hard page-break. If you use Word to prepare calculations, prepare
them in table form as if it were in Excel. Do not write anything past the
margins.

**Excel file**: The first tab is the cover page and must include your name, course, date, and the unit and assignment number. Each problem must be numb on a separate tab. Each tab must be properly labeled. Note that Excel is not actually required, but if you use Excel, you must use it correctly: one number in one cell, and each number (cell) properly labeled. Do not type formulas; instead, you must use Excel functions to calculate. Do not write anything past the margins. Use landscape page orientation if necessary.

PROBLEMS

Problem 1

Below is a production possibilities table for consumer goods (food) and capital goods (machinery). Graph the data using Excel and then answer the following questions.

A | B | C | D | E | F | |

FOOD | 0 | 10 | 20 | 30 | 40 | 50 |

MACHINES | 150 | 140 | 120 | 90 | 50 | 0 |

- What are the specific assumptions that underlie the production possibilities curve?
- What would be the cost of more food if the economy is at point C? What would be the cost of producing more machinery? How does the shape of the production possibilities curve reflect the law of increasing opportunity costs?
- What if this hypothetical economy were producing only 9 food and 130 machines and it was depicted by this production possibilities table and curve, what conclusions could be drawn about this economy’s resource utilization?
- Can this economy produce outside its current production possibilities? How can technological changes affect the production possibilities curve? How can international trade permit consumption above its production possibilities curve?

Problem 2

Evaluate each of the supply and demand scenarios below, answering the following questions:

- How will each affect equilibrium price and equilibrium quantity in a competitive market?
- Will price and quantity rise, fall, or be unchanged?
- Based on the magnitudes of the shifts, will the answers be indeterminate?

Provide an appropriate graph to illustrate each answer (this does not require use of Excel, although you may use it).

- Demand decreases and supply is constant.
- Demand increases and supply increases.
- Supply decreases and demand is constant.
- Supply increases and demand decreases.
- Demand increases and supply decreases.
- Demand decreases and supply decreases.
- Demand increases and supply is constant.

Note that ‘constant’ means with no shift while ‘increases’ or ‘decreases’ means a shift occurs.

Problem 3

Suppose that the demand and supply schedules for rental apartments in the city
of Gotham are as given in the table below.

Rent | Demand | Supply |

2,500.00 | 10000 | 15000 |

2,000.00 | 12500 | 12500 |

1,500.00 | 15000 | 10000 |

1,000.00 | 17500 | 7500 |

500.00 | 20000 | 5000 |

- What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?
- If the local government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
- Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
- Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply the housing. Assuming that demand remains unchanged, by how many units of housing would the government have to increase the supply of housing in order to get the market equilibrium rental price to fall to $1500 per month? To $1000 per month? To $500 per month?