1 The Hong Kong SAR Government has implemented minimum wage laws, with an aim to protect the welfare of workers.
i) Do you think that minimum wage laws can really benefit the workers in terms of wage and employment? Explain.
ii) Indicate and explain the efficiency loss of minimum wage laws.
B) Under the pressure form Hong Kong SAR Government, the gasoline suppliers in Hong Kong plan to reduce the retail price of gasoline. It is estimated that a 3 percent drop in price will increase the quantity demanded by 5 percent. Will the price reduction decrease the total revenue of the suppliers? Briefly explain.
2
a)John always spends 10% of his income on buying CDs. What is his income elasticity of demand for CDs? Explain your answer.
b) Suppose John's preference (taste) changes and he decides always to spend 20% of his income on buying CDs. What will happen to John's demand curve for CDs? What will happen to his income elasticity of demand for CDs? Explain your answer.
3) Economic downturn reduces the demand for iPad, and at the same time, the costs of producing iPad also decreases. How do these two events affect the equilibrium price and quantity of iPad? Explain in detail.