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Mrs Grey likes swimming and playing badminton as part of her exercise routine. She has a budget of up
to $25 to spend each week on getting fit. Each trip to the swimming pool costs $3, and each badminton
session costs $4.
Her marginal utility schedule is given below:
Number of trips Marginal utility of swimming Marginal utility of badminton
1 90 100
2 80 90
3 70 80
4 60 70
5 50 60Which combination of activities gives Mrs Grey the highest utility?
Swimming trips Badminton sessions
* 1 5
* 3 4
* 4 3
* 2 4How do I calculate this?
Quite tricky.
First work out the margin utility per $ that has to be spent.
S B
1 30 25
2 27 22.5
3 23 20
4 20 17.5
5 17 15Then, go down allocating your spend to the most rewarding outcome per $
1st session: better to chose S as 30>25
2nd session: 27 for S or 25 for B (1st session of B), so S again
3rd session: 23 for S or 25 for B (still 1st session of B), so B
4th session: 23 for S or 22.5 on B (2ns session there), so SKeep doing that , keeping an eye on the total money that can be spent and you will end up with 4S, 3 B
19. Country ABC is a country operating a balance of payments surplus on goods and services with
other countries. The demand for ABC products and services in other countries is very price elastic.
While demand in ABC for products and services from other countries is price inelastic.
If the value of the ABC currency falls against those of its international trading partners, what
will be the effect on ABC’s international trade situation?A. The value of imports will rise and the value of exports will fall
B. The value of imports will fall and the value of exports will rise
C. The value of both exports and imports will fall
D. The value of both exports and imports will riseCan I know the correct answer for this?
According to Porter’s five forces model, which TWO of the following would tend to indicate
there is a low threat of new entrants to the market?A. Low capital requirements
B. Patents exist on major product lines
C. Access to distribution channels is not restricted
D. Large numbers of suppliers of raw materials
E. Low switching costs for customers
F. Existing firms in the market are large
G. Rapidly expanding marketWhat are the correct answers to this question?
If ABC’s currency loses value, exports will be cheaper and imports more expensive. You should be able to use the elasticity information to decide on the relative effects of this on exports and imports.
If you need more let me know your ideas.
A low threat of new entrants means that there are barriers to entry. So go through and decide if each is likely to make it harder or easier to enter a market.
If you need more let me know your ideas.
So, lets say at the moment £1 = $1.4.
Is the £ weakens this might go to £1 = $1.3 (ie £1 buys fewer $)
Something priced at £5,000 would have had a price of $5,000 x 1.4 = $7,000; it will now have a price of $5,000 x 1.3 = $6,500 ie cheaper. If demand in the country exported to is elastic, this means that revenue increases as price decreases – so revenue from exports will rise.
Similarly, the price of imports will rise. As demand for imports is inelastic, demand will fall off sharply so amounts spent imports will fall.
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