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1. Supposed that you represent the shareholder board of Apple Inc. and decide to elicit high...

1. Supposed that you represent the shareholder board of Apple Inc. and decide to elicit high CEO effort to help the company:

What will be your incentive contract plan (e.g. bonus, stock option…etc.)?

Given your answer in a, if Apple does not perform as expected (say iphone X is not popular), what criticism of the incentive contract plan can you see?

2.  Please apply demand and supply analysis in CH 2 to answer the following questions related to the U.S. real estate market:

What will be the impact on residential real estate market if the Fed raises the interest rate again in this year? Please state the leftward/rightward shift on either demand/supply curve and comment on the equilibrium price change.   

If a price ceiling on real estate agency commission is limited at 1% only, what will be the impact on new market equilibrium price and quantity of residential real estate market? ? Please state the leftward/rightward shift on either demand/supply curve and comment on the equilibrium price change.

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Answer #1

1 I will link bonus to average of profit and sales. In this way neither will manager sell too much at lower price nor too low to gain higher price. The criticism I see is that it us not linked to innovation in production, design, marketing etc

The impact of policy will be to shift demand leftwards from D to Do. Price falls from p to po and quantity of real estate falls from q to qo in fig 1

The effect of lower commission is to shift demand curve upwards in fig 2 from D to D1. Price rises from p to p1 and quantity of real estate traded rises from q to q1

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