Show:
Ch. 4 - Supply and Demand
Ch. 5 - Elasticity
Ch. 6 - Price Floor/Ceiling and Taxes
Miscellaneous #1
Miscellaneous #2
100
This is the only factor that changes quantity for a good and does NOT shift the Supply/Demand curve.
price of a good.
100
What conclusion can you draw when a good's price elasticity of demand is equal to - 0.43?
The good has inelastic demand.
100
If a price floor is below the market equilibrium price, the price floor is considered ___________.
non-binding
100
The _________________ of any item is whatever must be given up to obtain it.
opportunity cost
100
What does a country have when they can produce a good at a lower opportunity cost compared to another country.
A Comparative Advantage
200
This exists when the quantity demanded for a good or service exceeds the quantity supplied of the good or service.
A shortage
200
What is the formula for cross price elasticity?
The percent change in Quantity Demand for Good A / The percent change in Price for Good B
200
If the market equilibrium price is $60, and the government institutes a price ceiling at $45, there would be a _________ in the market.
shortage
200
The adage "There's no such as free lunch" is a way to illustrate the economic principle that people face __________.
tradeoffs
200
What two markets are used to connect the households and firms in the circular flow diagram?
The product market and factor market
300
Good X and good Y are substitutes. If the price of good Y increases, then the ___________ (demand/quantity demanded) for Good X will ___________ (increase/decrease).
Demand; increase
300
The price elasticity of supply of hot dog buns is estimated to be 1.5. Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by ____ percent.
Decreases by 15 percent
300
What happens to supply and demand in the long run when there is a price ceiling? What is the effect on the surplus or shortage?
Supply and Demand become more elastic -- causes the shortage to become larger.
300
Suppose a farmer produces both apples and potatoes in her garden. If she must give up 14 bushels of apples to get 5 bushels of potatoes, then her opportunity cost of 1 bushel of potatoes is
opportunity cost = 2.8 bushels of apples
300
If a recession hits the country and the companies that produce cars and trucks begin to reduce production. Where on the production possibilities frontier are they?
Under/Below the PPF curve
400
If the price of lumber has decreased significantly and the TV show The Office has brought positive media attention to the paper industry, this would be the effect on Price and Quantity on the market for paper.
Price would be ambiguous and Quantity would increase (Supply and Demand increase)
400
If the price of a Snickers bar increases from $2 to $3 and the quantity demanded decreases from 250 to 100. What is the price elasticity of demand? Should they have raised price to increase total revenue?
Price elasticity is 2.14. No, Snickers is an elastic good, so to increase total revenue, they should decrease the price.
400
If the minimum wage was instituted at $15, and the market equilibrium wage was $9, the quantity of workers demanding a job would be 2,475 people, yet there would be only 1,650 jobs available at that wage. What is the result in the market?
A surplus of 825 workers looking for a job.
400
In the circular flow diagram, what flows from the households to the factor market?
Labor, land and capital (resources)
400
Mexico's production in one day: 20 computers, and 100 pairs of jeans. China's production in one day: 45 computers, and 120 pairs of jeans. Who has comparative advantage in computers? What is the value of their opportunity cost?
China (opp. cost = 2.67 or 2 2/3)
500
What shift(s) would cause equilibrium quantity to fall and equilibrium price to fall. And give one example where this would occur.
Demand decreases (Ex. The number of buyers decrease)
500
Name the four factors that affect how price elastic a good's demand is.
Luxury vs. necessity, long run vs. short run, number of close substitutes, and the definition of the market.
500
If the government institutes a tax on cigarettes which raises the price of cigarettes from $25 to $28. The sellers are able to keep $20 from each sale. How much of the tax is paid by the sellers? What is the elasticity relationship between demand and supply?
Sellers pay $5 of the tax. Demand is more elastic than Supply.
500
Suppose the state of Massachusetts passes a law that eliminates the tax on alcoholic beverages. As a result, people from surrounding states start to buy alcohol in MA. Which principle does this best illustrate?
People respond to incentives (Principle #4)
500
If Sally is debating whether she should buy her 3rd slice of pizza and each slice costs $3, but she's REALLY hungry and decides the benefit she'll get from the 3rd slice is greater than the cost, what economic principle does this exemplify?
Rational people think at the margin. (Principle #3)