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ECON 649 Economics Analysis Worksheet 2 For Economic Models

ECON 649 Economics Analysis – Worksheet 2 – Scarcity & Work Choice questions with answers. Get case study answers to questions in ECON 649 from Economics Assignment Experts Online for Economics Assignment Research Paper courses topics and Assignment Writing Services in Australia, UK and USA.

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A: ECONOMIC MODELS (12MARKS)

1).  The following is a map of Macquarie University.

ECONOMIC MODELS

  • Models omit unimportant details. Maps also ignore many aspects of reality (or details). State two details in the map of Macquarie University thatare omitted.  (1 mark) Why have these details been ignored? (1 mark)
  • Models include essential features relevant to its purpose. State two essential features of realitythat are included in the map of Macquarie University.(1 mark)Why are these features important? (1 mark)
  • What is the basic feature that maps and economic models have in common? (1 mark)
  • State a basic difference between the map of Macquarie University and economic models. Refer to the basic features of an economic model.  (1 mark)

2).   The following is a very simple economic model

very simple economic model

a)   State the purpose of this economic model. (1 mark)

b)   State two unimportant details that have been omitted from this model.(1 mark)

c)   How do the economic agents in the model interact with each other?(You don’t need to describe all the interactions)(1 mark)

d)   Let’s take a simple example. Pick a good.

  • How does the model explain the relationships between households, firms and the environment? (1mark)
  • What doesn’t the model include in this relationship that is of economic importance? Why are these relationships ignored? (1 mark)

B:  Relative Costs and the Industrial Revolution (2 Marks)

  1. One (partial) argument for the Industrial Revolution occurring in England was the incentives created by relative prices.
  • What relative prices were important in creating an incentive for technological innovation to occur in England in the 1700s? (1 mark)
  • How did these relative prices provide an incentive for technological innovation? (1 mark)

C:  A Model of the Industrial Revolution (11 Marks)

1).   The following shows different technologies for producing 100 metres of cloth.

Technology Number of workers Coal required (tonnes)
A 4 2
B 1 6
C 3 7
D 5 5

Which technologies would not be chosen by firms?  Explain.(1 mark)

2).   Isocost Lines: Introducing the relative price of inputs (labour and coal)

a).   Use the information in the following table, which shows the costs of different technologies for producing 100 metres of cloth. Calculate the total cost of each technology given the cost of the inputs.  (Show the calculation in the table). Highlight the least cost technology. (1 mark)

Technology Number of workers Coal required (tonnes) Total cost (£)
Wage £5, cost of coal £10 per tonne
A 4 2
B 1 6

b).   Explain theconcept captured by the isocost line in this particular scenario. (1 mark)

c).   Graph the isocost lines for Technology A and B.On the horizontal axis place the number of workers and the vertical axis, tonnes of coal.(You only need to include the quantities of the inputs for the two Don’t fuss over your graph). (1 mark)

3).   See the following table. Let’s assume there is an increase in the price of labour as occurred in England before the Industrial Revolution.

a).   Use the information in the following table. Calculate the total cost of each technology given the cost of the inputs.  (Show the calculation in the table). Highlight the least cost technology. (1 mark)

Technology Number of workers Coal required (tonnes) Total cost (£)
Wage £15, cost of coal £10 per tonne
A 4 2
B 1 6

b).   Redraw on a new graph the isocost lines for the two technologies using the original input prices. Now include the isocost lines for the new input prices.(1 mark)

c).   What is the economic rent (or benefits to firms) from adopting the new technology? Include the definition of economic rent in your answer. (2 marks)

d).   What will happen to firms continuing to use Technology A? How does this relate to the idea of creative destruction? (1 mark)

4).   The use of isocost lines to explain the adoption of particular technologies is a model.   (2 marks)

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