Review Chp.1-3

1

100

Qdx=100-2Px-3I+BPy

This demand function is about a(n):

Inferior good

Normal good

Necessity good

Inferior

200

Qdx= 200-4Px-2I+BPy

Income is 30 (in thousands)

Price of good Y $20

B is 1

What is the equation of the demand curve now?

Qdx=140-4Px

300

What is the equation for producer surplus?

Producer surplus=Price- Willingness to sell

Or PS= Price-cost

400

A commodity with .75 income elasticity makes it:

Normal

Inferior

Necessity

Luxury

Necessity

2

100

Qdx= 200-4Px-2I+BPy

X and Y are substitutes in this scenario

The unknown is:

b>0

b<0

b=0

b>0

200

Qsa= -40 + 10Pc+ 20W -6Ps

In this case copper and silver are _______ in production

Complements

Substitutes

By-products

Substitutes

300

The price of houses fluctuates between 500 and 600, the demand then fluctuates between 700 and 800. What is the price elasticity? Is it elastic or inelastic?

-.72, inelastic

400

if a product has elastic demand, its own-price elasticity of demand is:

ep>1

ep<1

ep<0

ep>0

ep>1

3

100

Qd=300 – 3p

Qs=-100 + 5p

What is the equilibrium in this market?

50=P

200

.Bob is purchasing a new car. The max he can afford is $12,000 but he only wants to spend $10,000. Then which is accurate:

if price is $12,000 he will buy it

if price is $10,000 he will buy it and gain 2,000 consumer surplus

if p is $9,000 he will buy it and gain 1,000 surplus

if p is $9,000 he will buy it and gain 1,000 surplus

300

Elasticity of grapes is 2.6 and price increases by 2%. What is the % change in quantity? Is it elastic or inelastic?

5.2 change in Q

Elastic

400

Qd=40-60Pc

Qs= -45 + 70Pc

equilibrium, surplus or shortage?

shortage

4

100

What area defines the consumer surplus?

Area below the demand curve and above the price

200

What does WTP stand for?

Willingness to pay

300

The price of alfalfa increased by 2% and demand decreased by 4%. What is the price elasticity?

Ep=-2

400

what is the difference between elasticity and slope ?

relative change vs absolute change 

elasticity determines relation between price and revenue

5

100

What area defines the producers surplus?

Area above the supply curve and below the price

200

What is the equation for consumer surplus? 

**think WTP

Consumer surplus= WTP-P

300

A commodity is perfectly elastic when:

1 possible price, bought at any quantity

400

What is the arc method equation?

Q2-Q1/(Q1+Q2)/2 over P2-P1/(P1+P2)/2