ation (1) represents the equilibrium in the goods market, equation conomy, and equation (3) is the Central Bank's loss function. Y is and are actual and target inflation, respectively; x and 3 are 's credibility and inflation aversion respectively. X Yt = At-art-1 πt = [xπ² + (1 − x)πt−1] + 0.5(Yt — Ye) L = (yt − Ye)² + ß(πt − π¹)² 2 T T For X For X and 3 for Economy A are x = 0.8 and 3 = 1. and 3 for Economy B are x = 0.5 and 3 = 1.5.
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(a) Derive the central banks’ best response for both economies.
(b) Represent these economies in a graph and explain how the central banks would respond
to a positive temporary aggregate demand shock, emphasising the key difffferences
between the two economies. (250 words max )
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- What is the price elasticity of demand (include negative sign if negative)? Please round your answer to the nearest hundredth. What is the price elasticity of supply? Please round your answer to the nearest hundredth.If no trade occurs between the markets, what are the equilibrium values of D1, S1, P1, D2, S2, and P2? Solve algebraically question number 1 that is picturedThe demand and supply function for a good are respectively Q= a+bP+cI and Q =d+gPwhere Q is quantity, P is price and I is income. Comparative statics analysis with respect to income I can be conducted in two alternative ways: (i) Explicitly solve for Q and P as a function of I, and then derive dQ/dl and dP/dl; (ii) Directly differentiate the above two equations with respect to I while taking Q and P as functions of I, and then solve the resulting two equations for dQ/dl and dP/dl. (a) Calculate equilibrium quantity and price for this market as functions of the parameters a, b, c, d, g and I. (b) Use your results from part (a) to calculate the comparative statics derivatives dP/dl and dQ/dl. (c) Now calculate the same derivatives dP/dl and dQ/dl using the comparative statics analysis method (ii) described above
- Assuming hypothetical equilibrium in Demand/Supply Model of Apples, illustrate impact of following events:Suppose the Doctors recommend eating Apples every morning. The Monsoon rains adversely affect the Apple Harvest. The government announces increase in Wages of workers. The price of petrol in the market comes down. Consumers Income falls during government imposed Lockdowns due to health concerns. Given below is the Supply Schedule of Nestle Milk per liter:Price of Milk per liter (in Rs) 100 200 300 400Quantity Supplied per day in liters (in 1000s) 100 200 300 400Use the above data to illustrate the Supply Curve in a graph with complete labels. Assume Rs. 200 is the original price of milk per liter and 200,000 liters is the original quantity of supply. Suppose the price rises from Rs. 200 to Rs. 300, what will be the amount of Quantity Supplied?Illustrate the impact of (C) on the graph. Is this a movement along the supply curve or shift of the curve?At a unit price of $340, the quantity demanded of a certain commodity is 80 pounds. If the unit price increases to $560, the quantity demanded decreases by 22 pounds. Find the demand equation (assuming it is linear) where p is the unit price and x is the quantity demanded for this commodity in pounds. p= At what price are no consumers willing to buy this commodity? According to the above model, how many pounds of this commodity would consumers take if it was free?Step3, part b of the question: it asks for equilibrium level of C. If formula for C is C= 1000+ 0.8Yd, then since at equilibrium Y=7000 shouldn't C be equal to C= 1000 + 0.8(7000-350) = 6320? If so, than the last part of the question regarding S should be 7000-6320= 680 Please let me know where I am wrong
- Now, we can plot the demand and supply curves on a graph, with P on the vertical axis and Q on the horizontal axis. Demand curve: P = 833 - Q To plot the demand curve, we can start with a point on the vertical axis where P = 833 when Q = 0. Then, we can plot additional points by subtracting values of Q from 100 and finding the corresponding values of P using the equation P = 833 - Q. This gives us the following demand curve: Supply curve: P = Q - 32 To plot the supply curve, we can start with a point on the vertical axis where P = -32 when Q = 0. Then, we can plot additional points by adding values of Q to 50 and finding the corresponding values of P using the equation P = Q - 32. This gives us the following supply curve:choose one in the brackets to fill in for the following question: If the wage rate for workers in car manufacturing rises, the (supply curve , quantity supplied ) for cars will [ increase, decrease, remain unchanged ) and the [ demand curve, quantity demanded) for cars will [ increase, remain unchanged, decrease) Consider a competitive market in equilibrium at (Q1,P1). When there is an increase in demand in this market, what exactly happens in this market? Help describe what happens by selecting the correct sequence of events from the drop-down menus below. [Advice: draw this situation in a competitive market diagram.] step 1:( creates an access demand at the original market price, this allows the market to clear at the original market price , this creates an excess supply at the original market price ) step 2: (this puts upward pressure on the price, this puts downward pressure on the price , this does not affect the price in this market ) step 3: ( there is an increase in supply, as…An economist estimates that a market has a demand curve of the form P = 26 - (0.867) Q and a supply curve of the form P = 0.5 + (1.21) Q. (See the curves graphed in the figure below.) Accordingly, she estimates that the equilibrium price ( P e) in the market will be $15.36 (or $15.355561). This means that the amount of the product bought and sold in the market must be ____.
- Find the equilibrium point of the demand and supply equations. Demand is p = 370 0.0003x Supply is p = 136 +0.0006x (x, p) =?Demand and Supply model In the notes and lessons, we saw that quantity demanded and quantity supplied may be related by the recurrence relations Pn+1-Pn =α (Dn - Pn), Dn+1-Dn =β (Pn - Dn), where Pn is the level production after n time intervals, Dn is the quantity demanded by the consumer and α and β are proportionality constants. Suppose α=β=k. Which of the following gives the best description of the behaviour of the quantity demanded and level of production when k=2? A. The level of production oscillates with a decreasing amplitude. The quantity demanded also oscillates with a decreasing amplitude. The level of production and quantity demanded diverge from each other as the number time steps n goes to infinity. B. The level of production oscillates with a decreasing amplitude. The quantity demanded also oscillates with a decreasing amplitude. The level of production and quantity demanded reach equilibrium as the number time steps n goes to infinity. C. The level of…Assume the aggregate demand and supply of a good are given by: Qd(p)=16−p & Qs(p)=3p−4 a.) Where p equals the price of the good. If there are no taxes imposed on the consumption or production of the good, what will be the competitive equilibrium quantity?