1. The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data.
Year Nominal GDP Billions, Price Index (1996 = 100) Real GDP, Billions
1960 $ 527.4 22.19 $____
1968 911.5 26.29 $____
1978 2295.9 48.22 $____
1988 4742.5 80.22 $____
1998 8790.2 103.22 $____
Suppose an economy's real GDP is $30,000 in year 1 and $31,200 in year 2. What is the growth rate of its real GDP? Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of GDP per capita?
3. If the CPI was 110 last year and is 121 this year, what is this year's rate of inflation? What is the "rule of 70"? How long would it take for the price level to double if inflation persisted at (a) 2, (b) 5, and (c) 10 percent per year?
4. Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand elasticity of demand for each of the four possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a nontechnical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment.
Product Price Quality Demanded
This solution shows step-by-step calculations to determine the real GDP, GDP per capita, price level and relationship of elasticity between the demand and the price changes.
Identify and discuss issues that affect cost on gasoline.
Gasoline as product:
1) Identify and discuss issues that affect cost on gasoline.
2) Discuss the impact of technology on productivity and average total cost.
3) Describe three to five factors in the economy that will impact the demand for gasoline and one for the cost associated with producing the good or service.
4) Identify the economic indicators that reflect those factors.
5) Locate a forecast for each of the economic indicators you have selected for the next two years. In some cases, it may be more feasible to look at prior trends for selected indicators rather than forecasts.
6) Comment on the degree of confidence that can be placed in economic forecasts.
7) Discuss the implications of this economic forecast and the income elasticity of demand for the pricing strategy.