Answer to Question 1
In the early 1960s, the nations of the world could be assigned rather easily to categories: The developed countries included most of Europe, North America, Japan, Australia, and New Zealand; the developing countries included the rest of the world. The developing nations were often referred to as the Third World to distinguish them from the Western industrialized nations (the First World) and the former Socialist bloc of Eastern European nations (the Second World).
Answer to Question 2
The budget equation states that a household's spending must equal its income. The budget equation is derived for two goods, bus rides and magazines. The amount spent on bus rides is (Pbus ride)(Qbus ride), the amount spent on magazines is (Pmagazine)(Qmagazine), and the consumer's income is y. We know that (Pmagazine)(Qmagazine) + (Pbus ride)(Qbus ride) = y. Rearrange this equality by subtracting the amount spent on bus rides from both sides to give (Pmagazine)(Qmagazine) = y (Pbus ride)(Qbus ride). Finally, divide both sides by the price of magazine to give the budget equation Qmagazine = y/Pmagazine (Pbus ride /Pmagazine)(Qbus ride). Substituting in our values, y = 40, P bus ride = 2 and P magazine = 4, gives Qmagazine = 40/4 (2/4)(Qbus ride) which is equal to Qmagazine = 10 0.5 Qbus ride
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