C1: Limits / Alternatives and Choices
This is the term for the highest-valued alternative you forgo when making a choice.
What is opportunity cost?
The coordination and incentive problems of a command system are primarily solved by this mechanism in market economies.
The Price System (Defined by the Market Demand & Supply)
This economic phenomenon occurs when the price of a good is set below equilibrium, often resulting in black markets.
What is a price ceiling? All Teams Bonus Points (Draw on the OTS Boards)
The percentage change in quantity demanded divided by the percentage change in price measures this.
What is price elasticity of demand?
Disneyland required guests to get wristbands for their pools this is to cut down on what kind of guests?
What are Free Riders?
When production occurs inside the PPC, this economic condition exists.
What is inefficient resource use?
In terms of the circular flow diagram, households make expenditures in the _________market and receive income through the _________market.
What is product; resource
These are the five main determinants of demand that can shift the demand curve.
What are income, consumer preferences, prices of related goods, number of buyers, and expectations?
A store raises the price of a product from $50 to $60, and total revenue falls from $5,000 to $4,800. Based on this, demand for the product is classified as this.
What is elastic?
This inefficiency represents lost net benefits when output diverges from the socially optimal level.
What is efficiency loss or deadweight loss?(OTS - BONUS - ALL TEAMS - DRAW it)
Write a Positive & Normative Economic Statement about the Eagles or the Phillies.
Positive = 100% Factual
Normative = Based on Judgement
This economic system uses individuals and businesses as decision-makers and relies on prices to allocate resources.
What is the market system?
When supply increases and demand decreases.
Price will fall, and quantity will be indeterminate. (OTS BONUS - ALL TEAMS DRAW IT!)
The price of tea rises by 10%, and the quantity demanded of coffee increases by 5%. Calculate the cross elasticity of demand and determine the relationship between these goods.
What is 0.5 (substitutes)? All Teams Bonus Points - (Write out the formula you used and show your work.)
Harper buys a skateboard for $40, for which she was willing to pay $42. The minimum acceptable price to the seller, William, was $30. (Calculate the Surpluses)
Harper experiences a consumer surplus of $2, and William experiences a producer surplus of $10. All Teams Bonus Points - (Draw pictorially on the OTS Boards)
Manco and Manco took over the abandoned pizza shop on 6th street to add to their portfolio. Draw the orignal PPC and what happens after the purchase of the new location.
PPC Shifting out to the right / Outward.
These two fundamental challenges plague centrally planned economies.
What are the coordination problem and the incentive problem?
A city sets a rent control price at $1,500 per month, while the equilibrium rent is $2,000 per month. If 15,000 apartments are supplied at the controlled price but 20,000 are demanded, this is the size of the shortage.
What is 5,000 apartments? All Teams Bonus Points (Draw on the OTS Boards)
When demand is this, total revenue moves in the opposite direction of price changes. (Act out your response TR Test Stretch Style)
What is elastic demand?
(OTS - Just for Brenna act out all the options of the TR Stretch for team points.)
OTS (All Teams) Government shutdowns often halt services such as federal parks, air travel, and loan offices, leading to lost output and reduced consumer welfare. Connect this situation to as many economic concepts from the course as possible.
Scarcity and Opportunity Cost
Underallocation of Resources / Market Failure
Marginal Analysis:
Opportunity Cost of Idle Labor
Allocative Efficiency:
Suppose that Ian receives a $20 gift card for the local coffee shop, where he only buys lattes and muffins. If the price of a latte is $4 and the price of a muffin is $2, then we can conclude that if Ian only buys one or the other, this is the maximum number of lattes or muffins he can purchase.
What is 5 lattes or 10 muffins? All Teams Bonus Points - (Draw the PPC on the OTS Boards)
Every economic system, whether market or command, must find a way to respond to these five core questions that determine how resources are allocated and how society meets its wants.
What are (1) What will be produced? (2) How will the goods and services be produced? (3) Who will get the output? (4) How will the system accommodate change? and (5) How will the system promote progress?
After an unprofitable spring semester, RCBC’s on-site café permanently closed. Using what you know about the determinants of supply, explain which factors may have caused the business to exit the market and how those changes shifted the supply curve.
Higher input costs (food, labor, utilities) reducing profitability
Declining number of sellers (café exits the market entirely)
Expectations of continued low demand from students
Loss of economies of scale or outdated technology/equipment
External factors such as higher taxes or supply disruptions
Suppose that as the price of Y rises from $12 to $15, the quantity of Y demanded decreases from 1000 to 900. Then the absolute value of the price elasticity (using the midpoint formula) is approximately
What is 0.47 or 0.50 All Teams Bonus Points - (Show your work on the OTS Boards)
When students chose to not attend class today, and miss the chance to earn 21 available midterm points, those points disappear from the grade “market,” creating this type of lost surplus.
What is deadweight loss?