Elasticity
What does elasticity measure?
Elasticity measures how responsive the quantity demanded of a good is to changes in price.
What does marginal utility measure?
The additional utility gained by the consumption of one additional unit of a good or service.
This economist won the Nobel Prize and criticized the conventional economic depiction of people as rational, well-informed, and possessing self-control.
Richard Thaler
A farmer with 2 employees signs a lease to rent1 tractor, 50 acres of land, and 1 plow. In the short run, which are NOT fixed inputs?
2 employees
If the price of a good with unitary elasticity increases by 10 percent, by what percentage will the quantity demanded change?
10 percent
The following table shows the different utility at each quantity consumed. What are the marginal utilities?
https://docs.google.com/document/d/1pumeOYs2_X7RyaVyB32Ntx_e-8YAFwFNa1P5Mp9gMrE/edit?usp=sharing
10, 9, 5
This economist argued that psychology is the foundation of economics
Vilfredo Pareto
If the farmer worked for somebody else, he could earn a salary of $50,000 per year. What type of cost is the money he gives up by choosing to run his own farm?
Opportunity cost/implicit cost
If the absolute value of a good's price elasticity is greater than 1, is the good elastic or inelastic?
Elastic
The following table shows the marginal utility for each additional hamburger consumed. If a hamburger costs 3 dollars, how many hamburgers should the customer buy to maximize their utility?
https://docs.google.com/document/d/1pumeOYs2_X7RyaVyB32Ntx_e-8YAFwFNa1P5Mp9gMrE/edit?usp=sharing
4
This economist argued that people make economic decisions based on what those around them are doing rather than rationality or research. The mental shortcuts people take are referred to as heuristics.
John Keynes
In the long run, what happens to the average fixed cost?
In 2015, the price of a chocolate bar was 2 dollars, and 100 chocolate bars were sold. In 2016, the price increased to 3 dollars, and 77 chocolate bars were sold. Calculate the price elasticity of demand.
.65
The following table shows the utility at each quantity consumed. What are the marginal utilities missing in this table?
https://docs.google.com/document/d/1pumeOYs2_X7RyaVyB32Ntx_e-8YAFwFNa1P5Mp9gMrE/edit?usp=sharing
7,4,3
This economist discussed self-control, over-confidence, and loss aversion several centuries before mainstream economic theories about these topics developed.
Adam Smith
Which of the following graphs represents a firm's output as they use more labor and equipment?
https://docs.google.com/document/d/1pumeOYs2_X7RyaVyB32Ntx_e-8YAFwFNa1P5Mp9gMrE/edit?usp=sharing
Picture 3
In 2019, the price of a Target desk lamp was 20 dollars, and consumers bought 50 lamps. In 2020, the price dropped to 15 dollars, and consumers bought 70 lamps. Calculate price elasticity of demand.
1.17
What is the law of diminishing marginal returns?
Eventually the marginal product for an input decreases as its use increases