Economics P12 june 2012 ANSWERS...!!!

[issac0215]

for question 1 , http://wiki.answers.com/Q/What_causes_a_PPC_to_shift .

 

[JuggyD]

Some are saying they do some say they don't. Arguments provided by both sides are equally good. Personally i feel its D, tax payments.

Ah alright then.

what was the answer to what is the factor which a private firm will not consider in a cost benefit analysis but a government project will?
was it consumer surplus, tax payments or interests charged?>

On the basis of the question though. Is it not in the interest of the government when making decisions with far reaching effects to aim for a an outcome that maximises the net social benefit (therefore include consumer surplus)? What tax payments are has wide meaning but in this case, it could mean any form of tax payments and not just income tax payments which affects individuals only and not firms.

Tax payments arise from specific taxes such as corporation tax or ad valorem taxes. By taking a look at corporation tax, a firm would have to consider this when making a CBA decision as it taxes their income/revenue. If they don't take this factor into account, they may make a bad decision when investing in something if they find out the tax payments causes their net revenue to fall leading to losses if they can no longer cover their total costs.

 

[JuggyD]

Govts definitely do, but firms ALSO take it into consideration http://smallbusiness.chron.com/importance-surplus-44967.html

so it cant be the awnser.

http://tutor2u.net/economics/revision-notes/as-markets-consumer-surplus.html

"Consumer surplus is a measure of the welfare that people gain from the consumption of goods and services, or a measure of the benefits they derive from the exchange of goods."

Governments are concerned with the welfare of its citizens when making decisions so it doesn't mean this is incorrect.

"Consumer surplus can be used frequently when analysing the impact of government intervention in any market – for example the effects of indirect taxation on cigarettes consumers or the introducing of road pricing schemes such as the London congestion charge."

 

[Agha shahrukh khalid]

what was the answer to what is the factor which a private firm will not consider in a cost benefit analysis but a government project will?
was it consumer surplus, tax payments or interests charged?>

I think the answer was Consumer Surplus...Because govt also charges tax on investment...so it cant be tax payment...

 

[JuggyD]

I would also say that governments always include consumer surplus in CBA but private firms do not always consider consumer surplus when their aim is not profit maximisation (which would erode consumer surplus if price discrimination is used). Other aims such as just carrying out business as a hobby (entrepreneur's decision) would not look at consumer surplus.

 

[Agha shahrukh khalid]

100 to 200 in 10 year isnt hyper is creeping anwer was D tha stated that overall their was inflation

How can it be Hyper Inflation can anybody explain me?...i think option D was the most appropriate one..

 

[Mattman]

It was definitely D, as we can see there was an increase in the index for all years

 

[ibadsiddiqi]

How can it be Hyper Inflation can anybody explain me?...i think option D was the most appropriate one..

It cannot be hyper inflation. Answer is D

 

[m3hdi *n3No*]

How can it be Hyper Inflation can anybody explain me?...i think option D was the most appropriate one..

see in 10 year index rise by 100 so each year rate of inflation was 10 and then after 2000 it started to fall around and was around 2 option d said from 2000 to 2007 their was inflation it was proves by cpi index moving alhtough at slower rate

 

[yellitgirl]

I answered C but apparently that doesn't lead to a shift inwards for a PPC. Instead, the answer was innovation since it is similar to technology. What confused others as well as me is that we thought innovation was to do with efficiency. However, innovation is concerned with how much you can produce with a given resource base and any improvement in innovation would allow to produce more and hence, a shift in the PPC. Therefore a DECREASE in innovation will lead to an inward shift in the PPC.

dude, it WAS C cox how can an "innovation" decrease leading to lower output? :S when something once has been invented, u cant just go back on the technology....the RATE of innovation can decrease but innovation itself cannot.
for example a country finds out a new method of extracting oil....it increases its PPC to the right....now in the future it can not just FORGET the technology which has already been invented and go back to producing less output.

 

[dJB]

The one with what govt. considers but firms does not... cant be tax payment as tax causes shift in supply curve ... hence firms considers them the answer is CBA

and i am pretty sure it is 1000 tonnes

and the 1 with ppc shift is not increase in price of energy as increase in price does not necessarily mean fall in supply or reduction in energy sources it can be because of increased demand .... so answer is decreased innovation ... u will find innovation as a cause of shift of ppc in many books

 

[yellitgirl]

The one with what govt. considers but firms does not... cant be tax payment as tax causes shift in supply curve ... hence firms considers them the answer is CBA

and i am pretty sure it is 1000 tonnes

and the 1 with ppc shift is not increase in price of energy as increase in price does not necessarily mean fall in supply or reduction in energy sources it can be because of increased demand .... so answer is decreased innovation ... u will find innovation as a cause of shift of ppc in many books

we can find it in many books saying that an INCREASE in innovation can shift the PPC to the RIGHT. but it doesnt say anywhere that it can DECREASE the output.

 

[dJB]

we can find it in many books saying that an INCREASE in innovation can shift the PPC to the RIGHT. but it doesnt say anywhere that it can DECREASE the output.

Ok but u cant find any book where it says changes in price of raw meterials i.e. energy has any effect on ppc

 

[junaidaftab]

the question is about what is the result from the improvement of BOP.
I think when their BOP improves , their currency will be appreciated.
Since the country is having a fixed exchange rate system , it will try to depreciate its currency by decreasing their interest rate.
The interest rate is low , so the investor will take out all the money and causes a rise in supply of the currency.
And the exchange rate will go back to normal.

Does it make sense?

Umm, the question didn't state that the Balance of Payment of the country has improved, and what measures would the country take to appreciate/depreciate its country.

 

[junaidaftab]

And, by the way, assuming ceteris paribus, if the exchange rate appreciates, the balance of payments account - or the current account, in particular - worsens.

 

[123add1]

yr what was the correct answer for XED??? any1 plz tell

 

[aamir9010]

it was tax payment

how can it be tax payment when the private firms have to pay tax to the government

 

[aamir9010]

hyper inflation occurs when the rate of inflation increases at a rapid rate. A 100 % inflation in 10 years is an average of 10% per year. that is normal inflation

 

[aamir9010]

yr what was the correct answer for XED??? any1 plz tell

the xed question the answer was D. because the xed value is 2.0 which is exactly between 1.75 and 2.5

 

[Ali Shujaat]

the inflation one was d. and yes it was consumer surplus. this is soooo confirmed so stop arguing over it. and the demand had to shift by 1000 units. confirmed.