Project #55119 - Economics Unit 3

The only portion of the assignment that is due today is Unit 3 initial discussion question, which is the first question. 

The syllabus is the same as the last assignment with the same requirements from the last unit 1 and 2.


Initial Discussion Question Unit 3 DUE WED 1-28-2015

The purpose of government subsidies is to encourage activities that are deemed to have positive spillovers. A professional sports team, for example, is thought to increase tax revenues and increased demand for local businesses.

Choose to discuss another good or service for which government provides a subsidy.   Include each of the following in your initial post.

1.  Describe the subsidy program and explain what spillovers are generated from the subsidy.  

2.  Explain how both consumer and producer surplus will be affected by the subsidy.  Will they increase or decrease?

3.  Who are the winners (i.e. increased surplus) and losers (loss of surplus) that result from the subsidy?  Remember that there are always trade-offs, and therefore, someone must be the loser.

Try not to choose an item that a classmate has already discussed.  In your responses to classmates, help them identify other possible spillovers.


Classmate response:


Perhaps one popular subsidy that I am familiar with and was actually able to take advantage of the program 6 years ago. This program was called the cash for clunkers program, which was supposed to be a subsidy to dealerships as incentive for helping the economy. The spillover from this program was to help jump start the economy and encourage consumers’ trade in old cars for a new and more efficient car. In this case surplus increased for dealerships because, consumers like myself trade in my 1999 Nissan Sentra and was able to purchase a brand new 2009 Jeep Patriot at a reasonable price. Not only was it at a reasonable price, but it was like a down payment of $3500.00 given for the trade in. The government was giving dealerships this money for those cars. In this case I think the producer surplus increased. Also I believe the consumer & dealerships were by far the winners and the producers the losers, because what happened to the demand of cars made after the program discontinued? Needless to say I just paid my car off last week and it is still running well.



One of the subsidies that many people are taking advantage of that is  normally out of reach is Obamacare. Obamacare is a subsidy designed to provide affordable health care for people that can't afford it or it is not offered by their employer. The subsidies is divided and three different parts Premium Tax Credit,  Cost Sharing Reduction and Medicaid. The premium tax credit lowers premiums and the Cost sharing reduction lower out of pocket cost. The spillover for Obamacare is to lower the amount on monthly premiums and reduce out of pocket cost. Ultimately providing American people with affordable healthcare. The consumer surplus will be drastically affected and increase finally taxpayers are able to afford yearly exams and receive preventive care.  The winners  of this subsidies is the taxpayers. Families are able to go to the marketplace and obtain affordable health care.

Unit 3 notes/lecture from instructor :

Unit 3 Homework Assignment:

1.       Review Slides 10-12 in your Attend section.  Suppose a local coffee shop knows that its elasticity of demand is 0.2.  Would you recommend that the coffee shop increase its price by 20%?  Why or why not?

2.       Review Slides 10-12 in your Attend section.  Suppose a cigarette manufacturer knows that its elasticity of demand is 1.3.  Would you recommend that they raise price by 20%?  Why or why not?

3.       Would government be better off taxing gasoline or Nike tennis shoes?  Use the concept of elasticity (or inelasticity) of demand to defend your choice.

4.    Define the following:

a.  Consumer surplus

b.  Producer surplus

c.  Total welfare

d.  Deadweight loss

5. Refer to Slide 18 in the Attend section.  Explain the effects of a tax on consumer and producer surplus.  Explain what happens to total welfare when government levies a per-unit tax on a good.  Use the concept of deadweight loss in your explanation.

6. What are the two characteristics that must be met for a good to be considered a “public good?”  Give an example of the “free rider” problem and explain why the good or service is subject to this problem.

*****In order to complete this assignment, I will need to come back on tomorrow evening and post the “Attend Slides” for the homework portion.*******


Unit 4 Discussion:

Price Discrimination

Find an example of price discrimination (other than those given in the Attend section).  You can find an article or use an example from your own experience. 

Which of the conditions necessary for price discrimination are met?


Classmate responses:

***Will post this on next week***


Unit 4 Homework assignment:

1.      Choose a market or industry that you think is close to perfectly competitive.  Then, explain whether or not your choice meets each of the characteristics shown in Slide #5 of the Attend.  Is the market really perfectly competitive?  Can absolute perfect competition exist in the “real world?”

2.        Take a look at the latest annual report for the Tennessee Regulatory Authority at:

What types of industries does TRA regulate? Choose a specific company that would fall within one of those industries. Why is this firm (and others within the industry) regulated? 

3.       Do each of characteristics of monopoly shown on Slide #18 in the Attend section apply to the firm you have chosen in question #2?  Explain why or why not each characteristic would or would not apply to your firm.

*****Will post the slides to complete this assignment on this week****




Unit 5 Discussion:

Policy Making Exercise:

Using what you have learned in this unit, choose a FISCAL policy that you would recommend to help an economy that is in a recession. You should not choose a monetary policy (i.e. interest rate manipulation, selling of bonds, or printing of money).

Explain how your policy would help increase aggregate demand. That is, does it increase C, I, G, or X?

Explain what would happen to prices (i.e. inflation).

You may use either the Modern Keynesian model or the Classical Model to conduct your analysis. Just be sure to note which one you are using.

For your responses to classmates, help them identify other effects of their policy OR explain how they might have arrived at a different conclusion if they had chosen the other model.


****Will post the classmate response in 2 weeks***

Unit 5 homework assignment:

1.       Compare and contrast the three types of unemployment that are covered in Slides 8-10 of the Attend section.  If you were a policy maker which type of unemployment would be most bothersome to you?

2.       What costs are associated with inflation?  Explain at least 3 different costs that individuals or businesses experience when inflation rises.

3.       Explain why transfer payments are not included in GDP

4.    Using the components of GDP covered in section 22.1 of your text, explain which component would be affected by the following (only one component should be chosen for each scenario):

          a.  You buy an Italian purse.

          b.  You buy a new house.

          c.  New lanes are added to Interstate 40.

          d.  You buy groceries.

          e.  You buy a new washer and dryer.

5.    Suppose the economy is at a macroeconomic equilibrium as is shown on Slide 40 of the Attend section.  The government decides to give every taxpayer a $500 tax refund.

a.  What happens to the aggregate demand curve after the refund?

b.  What happens to the price level after this change?

c.  Is real wealth increased or decreased as a result of the refund?


6.    Review Section 22.7 in your text.  Compare and contrast the results of the Classical Model and the Keynesian model after an expansionary policy.  Keep in mind that the economy is in a recession and not at full employment.  Address the following:

a.  The shape of the aggregate supply curve in each model in both the long-run and short-run.

b.  The effect of an expansionary policy on aggregate demand in both the long-run and short run.

c.  The effect of an expansionary policy on the price level in both the long-run and short-run.



Subject Business
Due By (Pacific Time) 01/28/2015 02:00 pm
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