Contents
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Description
This paper provides answers to the following questions –
1. Explain the advantages and disadvantages of regulating a natural monopoly through (a) a marginal cost pricing rule and (b) an average cost pricing rule.
2. What is a recessionary gap? How does the economy adjust to eliminate a recessionary gap?
3. How can a higher price of oil create inflation?
4. The dependency ratio, the proportion of people in the age group 0 to less than 15 years, plus the proportion of people in the age group 65+ years to the number of people in the age group 15 to less than 65 is rising.
a. In terms of GDP per capita why might this be a problem?
b. Explain how changes in labour force participation may partially offset the fall in GDP per capita.
c. In the absence of a rise in labour force participation or of an increase the hours worked per worker will we have to accept that GDP per capita will fall?
