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eco paper 3 !!!

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***exam***:
cld some 1 plz explain the reson 4 these answers !!

may/june 04

q7  answer C   ------ why isnt the answer 4 this 1 diminishing marginal utility ?
q24  answer c

question pap  http://www.xtremepapers.me/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_s04_qp_3.pdf


may/june 05
q 18  answer A
http://www.xtremepapers.me/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_s05_qp_3.pdf

Dasith:
may june 2004

question 7
its c because they are not asking about the individual but the individual firm ! utility dosent diminish here because many consumers , but individual consumer yes it does! , since the producers produce the same product , a reduction in price of one firm will cause all the consumers to demand from that producer , it wont be a downward slope but a shift , but since they say its a downward slope here we hav to assume its due to imperfect knowledge .

24)
bank gives 9000 out 0f 10 000 , then people deposit 9000 again , bank gives 8100 & so it continues..
untill cash retained by bank = initial cash deposit , credit multiplyer effect. so its 10000/0.1 x 0.9

Dasith:

& of course ans 4 the next question ;)

18:

This is a closed economy with no government !

present equribrium is @ an income of 220
As u know Income = expenditure = output =Aggragate demand(AD)

AD = consumption(C) + Investment ( I)     ## this is of course in a closed economy

IF AD =220   then  C = 3/4 x 220  & I = the rest since its in equilibrium

220 = 165 + I(I= 220-165)
220 = 165 + 55

& to reach full capacity the equlibrium income is:

240 = (3/4 x 240) + I
240 = 180  + 60


now as u can see the Investment incresd from 55 to 60 !

hope u get it

***exam***:
yeah Thanks a lotttttt  i got it !! :D :D

but with the ques 24 what is the formula for credit multiplier ? 

Dasith:

--- Quote from: ***exam*** on June 02, 2011, 11:20:50 am ---yeah Thanks a lotttttt  i got it !! :D :D

but with the ques 24 what is the formula for credit multiplier ? 


--- End quote ---

welcome ,

formula hmm ,  i think its

 Injection(i.e 10000)  / (leakages% i.e as decimal )   x (1- cash ratio % )

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