WORKSHOP 1
Introduction to Financial Economics (FINN 1061)
2023-2024
Question 1
Rival political groups argue about the value and effectiveness of speed cameras as a means of influencing driver behaviour and improving safety on the roads. An economist is asked to conduct research into the costs and benefits of speed cameras to help decision-making. What sort of factors will the economist have to take into consideration in such research, and what might be the challenges in identifying and quantifying the full range of costs and benefits?
Question 2
Consumers are now much more aware of ethical implications of their purchasing and consumption decisions. Questionable social or environment activities by firms and countries have also negatively influenced demand. Discuss and give examples to substantiate your answer.
Question 3
Using supply and demand diagrams, show the effect of the following events on the market for sweatshirts.
a. A drought in Egypt damages the cotton crop.
b. The price of leatherjackets falls.
c. New knitting machines are invented.
Question 4
a. Are fresh squeezed juices substitutes or complements for cola?
b. Using a supply and demand diagram, show what happens in the markets for juices if the tax on cola is increased.
c. Studies indicate that the price elasticity of demand for cola is about 0.4. If a packet of cola is currently priced at £6 and the government wants to reduce sugar consumption by 20 percent, by how much should it increase the price through levying a tax?
Question 5
Market research has revealed the following information about the market for chocolate bars: Qd = 1,600 - 300P, and the supply schedule is Qs = 1,400 + 700P. Calculate the equilibrium price and quantity in the market for chocolate bars.
Question 6
Suppose that the price of tickets to seeyour local footballteam play at home is determined by market forces. Currently, the demand and supply schedules areas follows:
Price (£) Quantity demanded Quantity supplied
10 50,000 30,000
20 40,000 30,000
30 30,000 30,000
40 20,000 30,000
50 10,000 30,000
a. Draw the demand and supply curves. What is unusual about this supply curve? Why might this be true?
b. What are the equilibrium price and quantity of tickets?
Question 7
Consider the impact of adecrease in the price of good X on the demand for good X and goodY when X andY are substitutes.
a. Will the substitution effect be positive, negative or is it not possible to say? b. Will the income effect be positive, negative or is it not possible to say?
c. Will the totaleffect be positive, negative or is it not possible to say?
Question 8
Please watch the video “Introducing ‘Doughnut’ Economics” and read the article “The Amsterdam City Doughnut” provided on this workshop section of the module page.
Can you think of some ways you can apply Doughnut Economics in the city where you live?
Question 9
Please watch the video “Starbucks enters Italy, but will Italians drink their coffee?” and “Why Starbucks failed in Australia?” and read the article “Can Starbucks succeed in Italy?” provided on this workshop section of the module page.
Share your thoughtshow Starbucks can reduce consumer price sensitivity in Milan?