Q1: a. What factors determine equilibrium price and quantity in a market?

b. What are the effects on price, quantity and revenue of an increase in supply when demand is:
(1) Is perfectly inelastic?
(2) Is perfectly elastic?
(3) Has unit elasticity?

c. What lessons can a business person learn from your analysis?

Q2 Economic growth is "the one big habit we finally must break" (Bill McKibben).

Discuss with relation to the world market for food

What is meant by the following costs of inflation?

(1) Shoe leather costs
(2) Menu costs
(3) Changing relative-price costs

b. Suppose inflation is too high. What measures to reduce the rate can be taken by:

(1) The Ministry of Finance?
(2) The Central Bank

Q3 What is meant by the concept ‘crowding out'.

b. Show how, in a fully-employed economy, an increase in government spending can crowd out private spending and reduce exports.

c. What are the implications of your analysis for business behavior?

Q4 What is meant by

(1) The natural rate of unemployment

(2) Frictional unemployment

(3) Structural unemployment

b. Many observers believe that, because of the exponential growth of information and related technologies, the pace of job destruction is increasing at a faster pace than the pace of job destruction, and the problem is likely to become more serious in the coming decade.

What policies can you suggest to cope with this problem?