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Economics Name Course Institution Date Question 1 Some presidential term spend (e.g. on roads) leads to an affix in productivity. a) footrace how an subjoin in much(prenominal) government expense shifts the PPF. change magnitude government outlay e.g. on roads leads to an increase in aggregate demand which leads to increase in production since in that location a need for firms to come more to satisfy the up-to-the-minute demand. This shifts the production possibility frontier (PPF) upwards. b) Show that welf ar disregard increase, and get by income and commuting cause to rate the ambiguous make on economic pulmonary tuberculosis and leisure. increase in government spending leads to an aggregate demand whence in income since at equilibrium aggregate demand is comprise to income. therefore consumers entrust chew out more income to spend thence if prices of commodities have non change income provide increase their spending whether the commodities be necessities or inferior goods besides with a Giffen good spending give increase contempt the change in prices and in such a carapace income effect will best the substitution effect. Question 2 job a consumer earns w1/hour for the outset q hours, and w2(> w1) for any additional hours. at that place are no taxes to pay, and the consumer has no other source of income.

a) take back the consumers budget constraint, and consent to the optimal choice of consumption and leisure. Explain why the consumer would non make out to work for q hours, or yet close to q hours. [pic] The consumer will lack to consume and also relax thus he will work until where his optimal consumption, the peripheral rate of substitution of consumption and leisure is equal to his lock rate. b) What happens when w2 increases, explaining in legal wound of income and substitution effects; consider the cases of (i) somebody who initially did not work overtime and (ii) someone who initially did work overtime. i. man-to-man who did not work overtime If W2 increases...If you require to get a wide essay, order it on our website: Orderessay

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