GDP and the components of GDP

Q1. What is GDP? Write down the components of GDP. Why do we care about the GDP and its growth?

Q2. Suppose we are analyzing the market for hot chocolate. Graphically illustrate the impact each of the following would have on demand or supply. Also show how equilibrium price and equilibrium quantity would change.

Winter starts, and the weather turns sharply colder.
The price of tea, a substitute for hot chocolate, falls.
The price of cocoa beans decreases.
The price of whipped cream falls.
A better method of harvesting cocoa beans is introduced.
The Surgeon General of the U.S. announces that hot chocolate cures acne.
Protesting farmers dump millions of gallons of milk, causing the price of milk to rise.
Consumer income falls because of a recession, and hot chocolate is considered a normal good.
Currently, the price of hot chocolate is $0.50 per cup above equilibrium.

Q3. Suppose we are analyzing the global market for ideas. Use the demand-supply framework to describe the demand and supply of ideas. List some shift factors that have impacts on demand and supply of ideas.

Q4. After watching the TED talk: Foresees Economic Growth by Alex Tabarrok, do you think it is in the material interests of high-income countries to help low-income countries improve their economic performance? Why or why not?

Sample Solution