1) In the table below showing demand and supply schedules for boat rides , if demand for boat rides increases to 20 rides a day what will the price be? PRICE: 2 4 6 8 10 12 QD(Rides/day): 100 90 80 70 60 50 QS(Rides/day):40 50 60 70 80 90 Options are: i) rise to rs 6 a ride ii)fall to rs 6 a ride iii)remains unchanged iv)rise to 10 a ride 2) if the marginal capital output ratio is 4, the ratio of injections to AD is 30% and investment constitutes 60% of all injections, what is the growth rate in the economy, assuming the economy is in equilibrium? i)15% ii)4.5% iii)7.5% iv)22.5% Please can someone tell me the ans with the logic!
Q1 Currently, QD = QS = 70 at a price of 8. If QD increases by 20, then the new equilibirum will be where QD = QS = 80 at a price of 10. So, (iv) is the answer. Q2 Growth is the proportionate rate of increase in national income Y, ie: g = delta Y/Y = (delta K / Y) / (delta K / delta Y) = i/k where i is the proportion of national income Y spent on investment I and k is the capital-output ratio. So, here: i = 0.3 * 0.6 = 18%, and k = 4, so: g = 18% / 4 = 4.5%
