Elasticity
If a good has lots of substitutes, that would make the demand for it... (inelastic/elastic). WHY?
Elastic. If the price goes up, I will just buy a substitute.
What is the law of demand?
Price goes up, demand goes down.
If a company puts out a controversial advertisement, how might the supply-demand curve change?
Demand might shift to the left (decrease)
What is opportunity cost
The value of the best option that you didn't do
How many hearts does an octopus have?
3
Give an example of an elastic good and an inelastic good and explain why they are each.
Elastic: ballpoint pens, rolex watches, chicken nuggets
Inelastic: insulin, electricity, college textbooks
What is consumer surplus?
The difference between the price and a consumer's willingness to pay
What does it mean to behave rationally?
Weighing the benefits and costs of something, and only buying/pursuing something if the benefits are greater.
What is scarcity?
The idea that we have finite resources and infinite wants. "There are no solutions, only trade-offs."
Why does the supply curve slope upward?
As price increases, the more firms can enter the market and operate at a profit. (Higher price -> more people want to enter market.)
The demand for which of these goods would be considered elastic? Why?
Housing, Nike Shoes, yachts, cigarettes
Nike shoes and yachts - many substitutes, people can go without luxury goods
What is a surplus? What is a shortage? Draw a supply-demand curve and show at what prices each would occur.
Surplus: S>D (Above equilibrium)
Shortage: D>S (Below Equilibrium)
Describe a situation involving diminishing marginal benefit.
After eating 17 tacos at Pink Agave, the 18th doesn't sound too appetizing, even if it's only 1$ on Tuesdays.
What is comparative advantage?
Comparative advantage is when one business/country can produce a product or service at a lower marginal opportunity cost - more goods for less resources.
What is absolute advantage
The ability to produce more of a good than someone else.
How do you find the price elasticity of demand?
%Delta(Q)/%Delta(P) ----> Midpoint method: (Diff/Avg)
Draw a supply demand curve and label the areas that represent consumer and producer surplus.
Top of left triangle - CS
Bottom of left triangle - PS
What makes a market competitive?
Many buyers and sellers, identical products, few barriers to entry and exit, sellers can't influence price
What is the difference between total and marginal opportunity cost?
Total is the value of the option you gave up, while marginal is the change in opportunity cost divided by the change in outcome.
Draw a supply demand curve. Label the equilibrium point, price, and quantity
Where the lines intersect
Why is gasoline inelastic in the short run and elastic in the long run?
People are heavily reliant on gasoline for transportation, so it takes more time for them to find substitutes and alternatives. (Electric cars, public transit, getting a bike, etc.)
What causes a supply curve to shift? What causes a demand curve to shift? Give examples of each, and say which way the curve will shift.
Supply: better technology, more/less sellers, gain/loss of resources
Demand: Income increase, social trends, increase in buyers
Draw what happens to the supply-demand curve of loose leaf paper when:
1. The school year starts
2. Tablets become very cheap
3. A local wildfire burns down thousands of acres of forest.
4. A new super-efficient chainsaw is developed.
1. demand shifts right
2. demand shifts left
3. supply shifts left
4. Supply shifts right
Draw a production possibilities frontier. What does this represent? Label a point that would be considered "inefficient".
A point inside the curve is inefficient, as the resources are not being fully utilized. PPF Represents the different combinations of goods that can be produced (options for resource utilization).
Name five classical music composers (any era).
Debussy, Schubert, Tchaikovsky, Bach, Rachmaninoff