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Homework answers / question archive / 1)Autonomous consumption [a] = $10, Marginal Propensity to Consume [ b] = 0
1)Autonomous consumption [a] = $10, Marginal Propensity to Consume [ b] = 0.9 Investment = $140 Calculate: 1)Consumption function 2)Aggregate Expenditure [AE] function 3)Equilibrium Real GDP [Y] 4)Multiplier
2)Distinguish among (a) gross profits, (b) operating profits, and (c) net profits.
3)The figure given below is the circular flow diagram of the economy of Argos. a. Place the numbers below in the appropriate blanks the diagram below. Rent Wages Profits Interest Transfer payments Taxes (households only) $150 600 90 120 180 Savings Government spending Exports Imports Investment $200 220 150 120 110 340 Imports: 120 Consumption: Exports: 150 Consumption less imports: Taxes: 340 Disposable income: Total business revenue: Government spending: Zm32.com BUSINESS SECTOR HOUSEHOLD SECTOR 220 960 Transfer payment: 180 Investment: 110 Factor incomes: 960 600 Savings: 200 Factor payments: Wages: Interest: 120 Rent: 150 Profits: 90
4)Automation, broadly referring to the adoption of machines and computers in the production process has become increasingly more popular across many sectors and countries. For example, the market for industrial robots has experienced a dramatic expansion in the last couple of decades, as shown in Figure 1. Figure 1 Annual shipments of industrial robots worldwide (thousand units) 563 491 381 Source: Modified from Exhibit 2, McKinsey & Company, Industrial Robotics: Insights into the Sector Future Growth Dynamics, July 2019. Note: Forecast 2018-2021 294 At 221 166 150 the 14 121 the same time, the prices of labour and robots have been changing. The case of US manufacturing sector in the last few decades is shown in Figure 2. 20F 2021 Figure 2: Robot prices and labour compensation in manufacturing in the US (1990=100) Source: Tilley, Jonathan, "Automation, Robotics, and the Factory of the Future", September 7, 2017, McKinsey & Company. 2000 2005 2010 2015 220 Labor costs 200 180 160 140 120 100 80 60 40 Robot prices 1990 1995 2000 2005 2010 Now, consider Bruno, who owns a small manufacturing firm and produces windscreens for automobiles. Currently Bruno uses two robots and ten workers including Angela in his production.
(Question 4] Discuss in 100-150 words how Bruno's decision to increase the use of robots and the general trend of increasing automation could affect in the future the following: • Angela's bargaining power, • Angela's real wage, and Bruno's profit. You must refer to Figure 3 in your discussion. The description of Figure 3 can be found in Unit 4 Section 12 of the prescribed textbook. [10 marks] Figure 3: Fraction of offers rejected in the ultimatum game, according to offer size and the number of Responders 100 One Responder Two Responders 75 Fraction of offers rejected (%) 50 25 ILLE 0 0 5 10 15 20 25 30 35 40 45 50 Fraction of the pie offered by the Proposer to the Responder(s) (%)
[Question 5] Does Bruno's decision to use more robots bring about a Pareto improvement? Discuss in 50-100 words based on your answer for Question 4.
1) consumption functions
C = a + b(Y-T)
Where autonomous consumption (a) = 10
b is mpc = 0.9
Y means income and T is taxes, so in this Tax is not given consumption function will be
C = 10 + 0.9Y
2) Aggregate expenditure function.
Investment = $140, but G and NX not given so we not consider this.
AE = C + I + G + NX
AE = 10 + 0.9Y + 140
This is aggregate expenditure function
AE = 150 + 0.9Y
3) at the equilibrium Real GDP and agreegate expenditure is equal.
Y = AE
Y = 150 + 0.9Y
Y - 0.9Y = 150
0.1Y = 150
Y = 1500
So the equilibrium Real GDP is $1500
4)
MPC = 0.9
Multiplier = 1/(1- MPC)
Multiplier = 1/(1 -0.9)
Multiplier = 1/0.1
Multiplier = 10
2)Gross Profit = TR - COGS
where TR = Total Revenue
COGS = Cost of Goods Sold
(b)
Operating profit is derived from gross profit.
It is the residual profit / income after taking into consideration all the cost of running the firm
(c)
Net Profit = Total profit remained after accounting all cash flows (positive and Negative)
3)Please use this google drive link to download the answer file.
answer 3.https://drive.google.com/file/d/1GJYhgINjYV5KXWRUGyf7Xu8ZP6MG6mFH/view?usp=sharing
answer 4.https://drive.google.com/file/d/1pccKTgYBDNcPqyWZiCY5Q5-LwE4vCbZJ/view?usp=sharing
Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process.
https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link
4)5. no,brunos decision to use more robots does not bring about pareto improvement.
Pareto optimally means someone cannot be made better off without making someone worse off.pareto improvement occurs when someone benefits or someone gets better off.
In brunos case parrot improvement is not possible due to the following reasons
1.robots would be increased for automation process.this means that number of workers would be decreased.cost of Bruno would increase.first of all the purchase of extra robots and robots maintenance cost.after bearing this cost,some other cost have to be cut down.Bruno incurs cost of workers so if robots replace workers then workers would loose their job.even if some workers still work,their real wage would decrease.
Example if Angela still works then her real wage would decrease.Angela might loose her job if the quantity of robots used by Bruno increases to a large extent.this he will do in order to increase profits.to make more profit,he will require more robots and if more robots are there,there would be less workers.
Angela's bargaining power would be less than bargaining power of bruno.therefore in any situation,Angela gaining from the increase in number of robots is not there and therefore parrot improvement is not possible.
From the above diagram of PPC,this concept can be understood in a better way
If Bruno increase the use of robot from 2 to 5 then workers would have to be decreased from 10 to 7.points A and B are pareto optimal points and that is why there is no pareto improvement possible.
