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4G Zong CMPak 16 Jazz HD [ 98 14 4:28 Report E J H D (1) Out of the following events, which are likely to cause the demand for coffee to increase? Explain your answers. a. An increase in the price of tea b. An increase in the price of doughnuts c. A decrease in the price of coffee d. The Surgeon General's announcement that drinking coffee lowers the risk of heart disease e. Heavy rains causing a record-low coffee harvest in Colombia (10%) (2) Joanna calculated that last year her income by fell by 4% and that the price of biscuits increased by 16% As a result of those changes Joanna's consumption of biscuits fell by 40% Calculate her price elasticity of demand for biscuits (2%) (3) An American touring Europe was surprised to discover that the distance from London to Belfast is 521Km and the cost of airfare for a return journey was £198, while the distance from London to Paris is 344Km and the return airfare was £188. Given that Paris is almost 200 Km closer to London than Belfast he thought that airfare to Paris was in comparison too high. What reasons may account for the difference noted? (3%) (4) Suppose that farmers can use their land to grow and sell soybeans and cotton How would farmers respond to rising cotton prices? (2%) 1. By producing less cotton and more soybeans 2. By decreasing the supply of soybeans and producing more cotton 3. By increasing the supply of soybeans and cotton 4. By decreasing the supply of soybeans and cotton (5) In the previous exercise suppose that the price of silk falls. How would farmers respond? (2%) 1. Farmers would respond by producing less cotton and more soybeans 2. Farmers would respond by decreasing the supply of soybeans and producing more cotton 3. Farmers would respond by increasing the supply of soybeans and cotton 4. Farmers would decrease the supply of soybeans and cotton (6) The price of good Y decreases by 8% and the quantity of good X sold increases by 4%. What is the cross-price elasticity of demand for good X with respect to good Y? How are good X and good Y related? (2%) The market supply and demand for solar panels are given respectively by Q = 80P - 5,000 and Q = 65,000 - 20P, where Pis price per solar panel and measures the quantity of solar panels. Suppose the government provides a £100 subsidy per solar panel. A A Calculate the price and equilibrium quantity before the government subsidy (3%) B Calculate the post-subsidy equilibrium quantity, the prices consumers pay and the price producers receive (3%) с How much does the subsidy program cost the government? (3%) (8) George bought a new train set. He paid £150 for the toy and received consumer surplus of £250. What was George's willingness to pay for the train set? A £150 B. 151 C. 400 D. £251 (2%) (9) The Figure below shows the trade in financial services between Britain and the EU. SB denotes the supply of financial services by British financial companies, and D3 shows the domestic demand for financial services by British consumers. Under free trade British financial houses can trade at the world market Pw. As a result of "hard Brexit", British financial houses are banned from doing business in the EU and are confined to the domestic market only (ignore trade with third countries) A. Identify British production, consumption, trade volume and total social welfare (consumption and production surpluses) under free trade. B. Identify British production, consumption, trade volume and total social welfare (consumption and production surpluses) after trade is banned. (15%) FIGURE 1: EU Imports of financial services from Britain Price D S. British Supply of Financial Services World Price under free trade