Workshop

The table sets out the demand and supply schedules for roses on a normal weekend.

Price (dollars per rose)	Quantity demanded	Quantity supplied
(roses per week)
6.00	150	60
7.00	100	100
8.00	70	130
9.00	50	150

Questions

1. If the price of a rose is$6, describe the situation in the rose market. Explain how the price adjusts.

1. If the price of a rose is $9, describe the situation in the rose market. Explain how the price adjusts.

1. What is the market equilibrium?

1. Rose sellers know that Mother's Day is next weekend and they expect the price to be higher, so they withhold 60 roses from the market this weekend. What is the price this weekend?

1. On Mother's Day, demand increases by 160 roses. What is the price of a rose on Mother's Day?

Explain with a chart.

Items in Dreamland's national accounts include:

• Government expenditure on goods and services; $600
• Consumption expenditure: $1,950
• Rent and interest: $400
• Indirect taxes less subsidies: $350
• Investment: $550
• Wages: $1,600
• Profit: $500
• Net exports: $200
• Depreciation: $450

Questions

1. Use the expenditure approach to calculate GDP.
2. Use the net income approach to calculate GDP.

Tropical Republic produces only bananas and coconuts. The base year is 2016, and the table gives the quantities produced and the market prices.

Quantities	2016	2017
Bananas	800 bunches	900 bunches
Coconuts	400 bunches	500 bunches
Prices	2016	2017
Bananas	$2 a bunch	$4 a bunch
Coconuts	$10 a bunch	$5 a bunch

1. Calculate nominal GDP in 2016 and 2017.
2. Calculate real GDP in 2017 expressed in base-year prices.

The people of Archy Archipelago buy only coconuts and shampoo. The CPI basket contains the quantities bought in 2016. In the same year, the average household's budget was $200 of which 70 percent was spent on coconuts when one coconut cost $4 and shampoo was $6 abottle. In 2017, the price of a coconut was $3 and the price of shampoo was $8 a bottle. Take 2016 as the base year.

1. Calculate the CPI basket and the amount an average household spent on both goods in 2016.
2. Calculate the CPI and the inflation rate in 2016 and 2017.

The BLS reported the following CPI data:

June 2014 238.3

June 2015 238.6

June 2016 241

1. Calculate the inflation rates for the years ended June 2015 and June 2016.