Questions on ECO Quiz 5

prateek.jain1284
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Questions on ECO Quiz 5

Postby prateek.jain1284 » Sat Oct 20, 2012 4:08 pm

1. The total revenue test is a method of estimating the price elasticity of demand by observing the change in total revenue that result from a change in the price, when all other influences on the quantity sold remain the same. Conclude from following result in total revenue test when cut in price decreases total revenue.
Choose one answer.
a. Demand is unit elastic
b. Demand is elastic
c. Demand is inelastic

Can you please provide me the answer, reasoning and reference of schweser notes?


2. The problem with the idea of utilitarianism will result in a tradeoff between –
Choose one answer.
a. Efficiency and Fairness
b. Efficiency and Competitiveness
c. Fairness and Competitiveness
Can you please provide me the answer, reasoning and reference of schweser notes?

3. Economy of India is increasing the demand for many types of goods and services. To estimate the demand for a particular item, which of the following elasticties of demand would be best choice for an analyst to calculate?
Choose one answer.
a. The unit elasticity
b. The price elasticity
c. The income elasticity

Can you please provide me the answer, reasoning only?

4. Please provide how do you determine which currency is base currency and which one is price currency, if you are given a currency quote?

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pankaj
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Re: Questions on ECO Quiz 5

Postby pankaj » Sun Oct 21, 2012 2:35 pm

Ans (2) Utilitarians
Utilitarians argued that income should be transferred from the rich to the poor until complete equality was achieved.

One problem with utilitarianism is the tradeoff between fairness and inefficiency. An effort to transfer wealth by heavily taxing rich people will decrease incentives for people to save money or work hard. This can lead to inefficient uses of capital and labor. Another source of inefficiency is the administrative cost of transferring money from the rich to the poor.

Ans (3) The correct answer is The income elasticity. The income elasticity of demand measures the effect of income changes on demand.

Ans (4)
Suppose the exchange rate is Rs45/USD, in this case the Indian rupee is the price currency and the USD is the base currency.

prateek.jain1284
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Re: Questions on ECO Quiz 5

Postby prateek.jain1284 » Mon Oct 22, 2012 1:04 pm

Please reply for question 1 and also state that whether it is a CFA L1 concept? If yes then please tell me where i can find it in schweser as i am unable to find it anywhere.

Also please state the reference for Q2 in schweser as i dont think its a level 1 concept.

Regarding Q4 i am asking about the rule, how you will determine a price currency and base currency and not an example. Plz state the rule?

content.pristine
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Re: Questions on ECO Quiz 5

Postby content.pristine » Thu Oct 25, 2012 12:15 pm

With respect to Q1, the answer is elastic. You can use the diagrams in LOS 13m to check this. This LOS is no longer tested though.

With respect to Q2, Utilitarianism is no longer tested in the exam.

For Q4, I’m don’t understand what you asked. Pankaj gave a correct answer. Can you be a little more specific?

8-)

prateek.jain1284
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Re: Questions on ECO Quiz 5

Postby prateek.jain1284 » Thu Oct 25, 2012 6:44 pm

Please remove questions which are not pertinent to xam.

I am asking HOW to determine which currency is base currency and which one is price currency. Pankaj's reply was an example and not a logic or explanation.

content.pristine
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Re: Questions on ECO Quiz 5

Postby content.pristine » Fri Oct 26, 2012 12:32 pm

I'm sorry for the inconvenience. Today, my team is uploading 5 brand new economics quizzes. All these questions pertain to the current syllabus.


The rule is simple:
If there is a number in the exchange rate, that automatically represents the price currency.
The base currency is implied as one unit.

Hope this answers your question
8-)

prateek.jain1284
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Re: Questions on ECO Quiz 5

Postby prateek.jain1284 » Fri Oct 26, 2012 8:48 pm

Does this rule remains same in case of direct and indirect quote?

content.pristine
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Re: Questions on ECO Quiz 5

Postby content.pristine » Sat Oct 27, 2012 4:31 pm

Absolutely. When ever there is a number involved, that is always the price currency. The base currency always represents 1 unit.

8-)


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