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Question 1

Upstream, downstream and own effects in automotive industry

Answer 1

Upstream-

Question 2

Explain the supply + demand shocks of covid

Answer 2

• Supply- supply chain issues, productivity issues, firms face liquidity issues from lower demand so go bankrupt- AS shift in
• Demand effects from uncertainty about policies and workers lose jobs thus AD shifts in, loop

Question 3

Explain demand for network goods

Answer 3

• Demand increases with Q, falls with price
• Critical mass where value of good is greater than or equal to its price= reddit

Question 4

3 main pricing strategies to capture critical mass

Answer 4

• Freemium
• Dynamic pricing
• Price discrimination

Question 5

Explain same side and cross side network effects in console sector

Answer 5

• Same side= Increase in players increases value of network
• Cross side, increase in clientele increases games developed by game developers

Question 6

Abatement cost-environment trade off diagram

Question 7

Policy maker choice- abatement cost-consumption g/s diagra,

Question 8

Cap and trade diagram

Question 9

Socially optimal q achieved from sugar tax

Question 10

Regressive/progressive sugar tax point

Answer 10

• Progressive in health
• Regressive in tax

Question 11

Differentiate between Complementary, persuasive and informative

Answer 11

Persuasive- Lowers PED, anti competitive, increase cost increase prices
- Complementary- Anti competitive- increases consumer utility, demand increases- price increases
- Informative- Increase price competition and expands demand, increases PED

Question 12

By tasks- which get automated which not

Answer 12

Automated- middle wage jobs- routine tasks
- Bottom and top of wage distribution not automated- abstract and manual tasks

Question 13

How to measure risk

Answer 13

Leverage ratio which is liabilities/ equity

Question 14

Bank panic explanation

Answer 14

• Rumours of riskiness of assets invested in of bank
• Payoff of withdrawing or holding as an investor

Question 15

How can bank insolvency be a self fulfilling prophecy

Answer 15

• Rumours of bank becoming insolvent leads to a bank run
• Then bank needs to fulfil obligations to other banks so sells assets at lower price thus goes insolvent
• Interconnected bank network leads to contagion and wider systemic risk

Question 16

Currency crises trade off ( if everyone goes then peg abandon) and currency devalued + currency mismatch a

Answer 16

Might have to liquidate assets to meet demand of foreign creditors, may not have sufficient funds after depreciation

Question 17

Elasticity of substitution

Answer 17

The responsiveness of factor demand to changes in factor prices is measured by the elasticity of substitution