# ECONOMIC COURSEWORK

ECONOMIC COURSEWORK
1. (Use Excel) Consider Bob, an 18 year old who is about to embark on a four-year degree program. The tuition for the course is \$18,000 per year. Bob currently works
at Vons making \$16,000 per year and will have to surrender his job to pursue the degree. Based on the BLS Occupational Handbook Bob anticipates his earnings will be
\$20,000 more each year following graduation (starting in year 5) until he retires after his 30th year of work. For your calculations you can assume all payments and
income are received at the end of each year. (8pts)
a. Calculate the net present value of this investment assuming a discount rate at the current 30 year Treasury note rate of ˜ 3.0%.
b. Calculate the internal rate of return from the investment in education.
c. Based on the NPV and IRR, should he undertake the program? Why?
d. Attach Excel spreadsheet with data and results.
2. The numbers in the table below represent values of output (Q), capital (K), labor (L), wage (W), and the rental rate of capital (R) for a business firm over two
periods. (6pts)
Period
K
L
W
R
Q
1
30
50
200
100
500
2
40
55
180
90
510
a. Use this information to calculate the wage elasticity of demand coefficient.
b. Assuming the same mathematical relationship exists for capital; calculate a rental elasticity of demand coefficient.
3. Steven Slacker is age 25, has an MBA degree, but is not working. Instead he is living at a major ski area, using the \$2,000 per week he gets from his wealthy
parents. The parents, however, seeing that Steve is becoming a permanent slacker, decide to end this weekly payment. As a result, Steve chooses to take a job that pays
\$1,000 per week for 40 hours of work. (3pts)
a. Construct a single income-leisure choice graph to show Steve’s situation before his parents’ decision.
b. Construct a single income-leisure choice graph to show Steve’s situation after his parents’ decision.
c. Summarize the outcome of this change for hours of work, total weekly income, and Steve’s total utility.
4. “The added-worker effect can be explained in terms of the income effect, while the discouraged worker effect is based on the substitution effect.” Do you agree with
this statement? Why? (2pts)
5. Go to the Bureau of Labor Statistics website (use attached link) to generate the appropriate data and answer the questions below. Print and attach the appropriate
excel tables from the website to support your answers, only attach those with pertinent info to save paper. (6pts)
a. What was the seasonally adjusted Labor Force Participation Rates for men and women (>16) combined in January of 1950 and for January 2015?
b. What was the seasonally adjusted Labor Force Participation Rates for men (>20) in January 1950 and for January 2015?
c. What was the seasonally adjusted Labor Force Participation Rates for women (>20) in January 1950 and for January 2015?
d. What was the seasonally adjusted Labor Force Participation Rates for male and female teenagers combined in January 1950 and for January 2015?
e. List at least 2 possible explanations each a, b, c, & d above?

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