Discuss doubts: P1 and P2 Economics AS

[Qamar Baloch]

Hi dear students if you are worried about your P1 (ECONOMICS) which was held on 15 May then you may clear your doubts in discussion with Mr. Qamar Baloch. You may also get help for upcoming examination of P2 which is to be held on 22 May 2012. (+92) 3217555550. [email protected]

 

[Devlol]

What are your thoughts on the question which asks"What does the government consider but firms dont when deciding whether to invest in something or not"
Consumer surplus or Tax Payments?

 

[Agassi Cazaubon]

What are your thoughts on the question which asks"What does the government consider but firms dont when deciding whether to invest in something or not"
Consumer surplus or Tax Payments?

Why would governments care about tax payments when they want to invest in a project ? Do they pay taxes to themselves ? Why wouldn't firms care about tax payments which would be a private cost to them ?

 

[Qamar Baloch]

firms do not bother about consumer surplus because their aim is to get producer surplus due to which they also discriminate prices as well. The correct option for this question is consumer surplus.

 

[Agassi Cazaubon]

firms do not bother about consumer surplus because their aim is to get producer surplus due to which they also discriminate prices as well. The correct option for this question is consumer surplus.

Hey man there was also a question regarding the production possibility curve. It asked which factor would cause the production possibility curve to shrink ( Shift inward) ?

increase in cost of energy or decrease in innovation

My contention is that an increase in the price of energy would cause cost-push inflation and hence cause the Long Run Aggregate Supply Curve to shift to the left and hence reduce the full employment level of output to a level lower than before.

Although I am interested in why it would be decrease in innovation if that's the answer

 

[Qamar Baloch]

Non of these was coorect answer.

 

[Agassi Cazaubon]

Non of these was coorect answer.

But the other answers were an increase in retirement age and decrease in unemployment..

 

[Qamar Baloch]

increase in retirement age is the correct option but i m sure that u will wonder how it can be. Yes?

 

[Agassi Cazaubon]

increase in retirement age is the correct option but i m sure that u will wonder how it can be. Yes?

Wouldn't that increase the size of the labour force ?

 

[Qamar Baloch]

Rise in retirment age leads to low productivity and low productivity shifts the PPC inwards and there will be lesser entry of energatic workforce into the working bracket. Most of the people think that productivity rises with the experience and age. I do believe but keep in mind retirement age means the age of 60 years or above. The worker who is 60 years age it means his body parts are not suitable for job. They need care and help. They are actually dependent people age group and there will be no rise in workforce. they get obsoleted from that segment even they are working as we know according to the claiment count and labour force survey we come to know that many people who are working but they are not the part of labour force like child labour and people of 60 and above. Are u convinced from this? If u need further clarification you may ask me?

 

[Qamar Baloch]

Dear students please come and discuss your problems. It would help you a lot for paper-2 as well. Come on I am here. Qamar Baloch.

 

[Devlol]

But we dont know the retirement age.. for all we know retirement age is 40.

BTW for the XED question whats the awnser? People got1.66 and 2 but the question said"WITHIN the range" so people said its B instead of C?(C is 1.66-2)
B is (1.something-2.something)

 

[Qamar Baloch]

Make it clear that only for forces where the soldiers are not contributing to the production are retired at 40. All other type of workers including teachers, doctors, factory workers, engineers and many more get retired at 60 and these are also defined by world bank.

 

[Qamar Baloch]

the exact answer for calculation was 2. As we were to told within which range XED lies. It means it must be 2 or below 2. While 2.5 does not come under the range of 2. It is outside the range of 2. So, 1.66 to 2 is the correct option.

 

[Qamar Baloch]

Furthermore if you are choosing 2.5 then what is wrong with 2.4 which was also given in the same question. It was the question of common sense as well. When there are two values higher than 2 then to select 2.5 will make injustice with 2.4. Am I right?

 

[junaidaftab]

What were the answers to the following questions:

1) Why does a country face a relatively low rate of inflation, even though it has expanded its economy and now faces a low rate of unemployment?
2) How would an economy improve its Balance of Payments under a fixed exchange rate system?
3) Which two sections of the BOP will be amended if a bank borrows money from an overseas bank?

 

[Qamar Baloch]

1. Fall in unemployment leads to higher inflation. It is a fact. Its is the phenomenon of short run philips curve. Right? But in this situation there is fall in unemployment but at the same inflation rate is low. It has happened because global competition does not allow the firms to passing on the higher costs to the consumers. If they do so then their demand will fall dramatically and obviously their total revenue will fall. So, the correct answer was global competition.

 

[Qamar Baloch]

2. Basically this question was of higher difficulty for AS students who are just appearing in AS as they do not know about national income concepts. Rise in national income is the correct answer for this. National income is =C+I+G+(X-M). X is exports and M is imports. When X is greater than M. It means it would lead to higher positive value to be added to C + + I +G. So, higher national income was correct option in case of fixed exchange rate.

 

[Qamar Baloch]

3. It affects financial account and net income flows.

 

[Agassi Cazaubon]

Rise in retirment age leads to low productivity and low productivity shifts the PPC inwards and there will be lesser entry of energatic workforce into the working bracket. Most of the people think that productivity rises with the experience and age. I do believe but keep in mind retirement age means the age of 60 years or above. The worker who is 60 years age it means his body parts are not suitable for job. They need care and help. They are actually dependent people age group and there will be no rise in workforce. they get obsoleted from that segment even they are working as we know according to the claiment count and labour force survey we come to know that many people who are working but they are not the part of labour force like child labour and people of 60 and above. Are u convinced from this? If u need further clarification you may ask me?

I thought that for a little while but the problem is that the actual labour force will still increase whether or not labour force survey or claimant count don't take them into account.. and you saying the additional workers will be slightly less productive than those workers already contributing to the labour force, sure, but although they produce less they still add to production.. the way I see it is like this.. say you have a business for people carrying rocks.. and you can only employ one person with two hands.. that person is a productive worker lets say now you have the additional possibility of hiring someone else but that person has one hand.. wouldn't your potential output then increase ?