Econ

Assignment #1 Avenue Drop Box 11:59 PM Friday May 16, 2014

Question #1: (60 marks)

Consider a perfectly competitive economy with the following demand and supply functions of good X.

P = 100 – Q [Demand function]

P = 20 + Q [Supply function]

In the above equations, P stands for dollar price per unit of X and Q stands for units of good X.

Each numerical answer is derived from properly drawn diagram and each answer is worth 4 marks.

(a) If the economy is not allowed to engage in international trade (closed economy assumption), what will be the following equilibrium solutions?

P = $ 60

Q = 40

Consumer surplus = $ 800

Producer surplus = $ 800

(b) Assume that the world price of good X is $30. Find the following equilibrium solutions.

Quantity of import = 60

Consumer surplus = $ 2450

Producer surplus = $ 50

Compare the answers of part (a) and (b) to find the economy’s net gain from free trade.

Net gain from trade = $ 900

(c) Assume that the world price is $80, not $30. Find the following solutions:

Quantity of export = 40

Consumer surplus = $ 200

Producer surplus = $ 1800

Compare the answers of part (a) and (c) and find the economy’s net gain from free trade.

Net gain from trade = $ 400

(d) Outline the adverse effects of globalization in emerging economies.

1.depletion of resources.

2.pollution and environmental damages

3.low-wage earning workers

4.unsafe working conditions

5.poor quality products.

Question #2: (20 marks)

What is social capital? What are the components of social capital? Find the contrasting features between social capital and economic capital.

Social capital is the network possessed by individuals and their communities. It extent and nature are often measured by the number and strength of interpersonal contacts. It contains group characteristics, togetherness, generalized norms, and trusts. Economic capital refers as tangible and durable objects while social capital is...