Question 1
Assume that the Energy Balance (on page 40 of your lecture notes) is for country X, for the year years 2016, and the Updated Energy Balance (on page 41) - for the year 2019.How will you modify this Updated Energy Balance if, in addition to the information already available, the following information – for the year 2019 - also becomes available: electricity and gas transmission losses in that year will be 10 and 3 per cent, respectively; and a new nuclear plant will produce 4PJ of electricity. Provide only the modified table, with key assumptions and the underlying reasoning behind modified values noted below the table. (one table and no more than three dot points, with each dot point no more than three lines.)
Question 2
‘Continental Power’ produces and sells electricity. In the year 2016, the total market value of electricity sold by the company was $7.6 million. The production process consumed raw materials worth $3.3million, $1.6 million was paid as rent for land, $1.7million for interest on capital, and $4 million for wages in that year. The company sold $0.8million worth of electricity to a neighbouring country. The company paid, to the government, $0.4 million by way of indirect taxes during the year. On the basis of this information please determine the following (please show your workings for your answers):
a) Profit made by the company in the year 2016.
b) Value Added by the company for the year 2016.
Question 3
The following diagram shows – for the year 2016 - select information for an economy made up of three industries (just write your answers to these questions in your submission).
Question 4
a)How much will the output of Sector 1 increase corresponding to one unit increase in final demand for the output of Sector 2, assuming that there is no change in production technology and final demand for the outputs of Sector 1 and Sector 3?
Question 5
b) What will be the increase in total output of each sector if the final demand for the output of each sector increases by 20 units?
c) What would the increase in the total output of each sector if the final demand for the output of Sector 1 increases by 20 units, Sector 2 by 10 units and Sector 3 by 1 unit?
Question 6
d) Assume that the government is planning to spend an additional one billion dollars. If the objective is to maximize the economy-wide total output, which type of sectoral output should the government purchase?
Answers:
Question 1
|
Coal
|
Crude
|
Petroleum Products
|
Hydro-power
|
Nuclear energy
|
electricity
|
Total
|
Other
Households
Transport
Industry
|
7
|
|
96
13
243
112
|
|
|
24
14
1
39
|
97.1
27
244
158
|
Total final use
|
7
|
|
464
|
|
|
78
|
737
|
Transmission losses
|
|
|
13.92
|
|
|
7.8
|
21.72
|
net final use
|
7
|
|
477.92
|
|
|
85.8
|
758.72
|
Nuclear power plants
Electric Power Plants
Refineries
|
-18
|
540
|
-156
500
|
-48
|
-19
|
4
74
|
|
Primary Supply
|
25
|
540
|
133.92
|
48
|
19
|
7.8
|
758.72
|
Stock exchange
Exports
Imports
|
4
|
-5
543
|
133.92
|
|
|
7.8
|
-5
688.72
|
Primary Production
|
21
|
2
|
|
48
|
19
|
|
90
|
- The final consumption of petroleum products is estimated to be 464 PJ. Considering the loss of energy during transmission of gas to e 3% of the total production, then this figure needs to be inflated by 3% so as to cater for the lost energy, which is 13.92 PJ. To provide this energy in 2019, country X will have to increase its projected imports by 13.92 PJ.
- Since 10%$ of the electricity is expected to be lost during transmission, the total projected energy use is inflated by 10%. Country X will therefore have to increase imported electricity by 3.8 PJ since the extra 4 PJ will be provided by the Nuclear power plant. The nuclear power plant is expected to use all of its output on electricity.
- The key assumption use in estimating the total demand for energy is that, importing more energy to balance demand and supply is the best conceivable way. Hence all increases lead to an increase in energy imported.
Question 2
- Profit made by the company in the year 2016.
Profit= Total sales- Expenses
(7.6+0.8) – (3.3+1.6+4)
= $ -0.5 million.
- b) Value Added by the company for the year 2016.
Value Added is calculated as
= (7.6 +0.8) - 3.3
= $5.1 Million,
Question 3
- None of the Above
- $ 130bn
- $ 270bn
- $330bn
- $ 280bn
Question 4
a). Sector 1 output will increase by -4.77 if the final demand for sector 2 increase by 1 unit. Holding all the other factors constant.
7.52 -4.77 -0.49
-3.1 7.42 -2.8
-0.84 -2.11 4.18
|
b). to calculate the level of output needed to meet demand, X= (I-A)-1× D
7.52 -4.77 -0.49
-3.1 7.42 -2.8
-0.84 -2.11 4.18
|
Level of output will increase by 45.2, 30.4 and 24.6 respectively.
c).
7.52 -4.77 -0.49
-3.1 7.42 -2.8
-0.84 -2.11 4.18
|
The level of output will increase by 45.2, 15.2 and 3.9 respectively
d). the government should increase its expenditure on the labour sector. This will increase the income for households which will in turn lead to an increase in amount of products demanded.
Question 5
Energy demand will increase by 1.2 PJ.
Question 6
- It is based on the assumption that co-efficient of production is fixed. This ignores the reality that, substitutions do exist. Either in the short-run or long-run, and the possibility is even greater in the long-run.
- The assumption is that output of one industry will be used in another industry is unrealistic. In most cases, factors are not divisible and a need to increase output will not only be met by increasing inputs. Technology may as well be improved.
- The model is rigid and such factors such as bottlenecks, increased costs of production etc. are not reflected. It only dwells on the production side of the economy.