Economics Group Assignment-E161

Thomas Newcombe-13810707
Joshua Beck-13842196
Ryan Reardon- 1381702
Finance and Investment-Seminar group J
27/01/2014

i)A) GDP= C+I+G+(X-M)

828,081+286,812+238,531+(369,691-424,128) = 1,298,987 million
therefore the GDP according to the expenditures approach is 1,298,987 million
B) The output measure discrepancy is 635 million therefore the output measure of GDP is
1,298,987-635 = 1,298,352 million
C) GNP = GDP at market prices+ Net factor income from the rest of the world
This means that GNP = 1,298,532+17,334
1,298,532+17,334 = 1,315,866
D) NNP= GNP- Fixed Capital Consumption
Therefore NNP = 1,315,866-133,936
1,315,866-133,936 = 1,181,930 million
Hence NNP = 1,181,930 million
E) NNP at market prices = normal NNP- indirect taxes
therefore NNP at market prices = 1,181,930- 144,663
1,181,930-144,663 = 1,037,267
ii)
Price elasticity of demand = Percentage change in quantity
Percentage Change in price
Percentage change in quantity = Price elasticity of demand X Percentage change in price
A) If Price elasticity of demand (PED) is -0.2 (Inelastic)
PED = -0.2
Change in price = 5-4
5-4 = 1
4 = 100% therefore 1 = 25%
therefore the percentage change in price is 25% = 0.25
Percentage change in quantity = -0.2 X 0.25
-0.2 X 0.25 = -0.05 = -5%
Therefore the percentage change in quantity demanded when price elasticity is -0.2 is -5%
If the original quantity demanded was 1000 packs, the demand would fall by 5% making demand
now 950 packs. Originally the tax was 1 so 1000 X 1 = 1000
Now tax is 2 and quantity demanded is 950, 950 X 2 = 1900
This is therefore an increase in overall taxes of 900 which is 90%
Therefore percentage change in overall taxes is 90%
B) If price elasticity of demand is -2 (Elastic)
Change in price = 5-4
5-4 = 1
4 = 100% therefore 1 = 25%
percentage change in price = 25% = 0.25
Percentage change in quantity = -2 X 0.25
-2 X 0.25 = -0.5 = -50%
Therefore the percentage change in quantity demanded when price elasticity is -2 is -50%
If the original quantity demanded was 1000 packs, the demand would fall by 50% making demand
now 500 packs. With the new tax this means that 500 X 2 =1000
This means that there is no increase in overall tax
Therefore percentage change in overall tax is 0%