Scarcity, Opportunity Cost, PPC
The most fundamental issues that economics addresses?
To calculate an input comparative advantage problem, what three letters tell you what to do?
I.O.U.
input, other, under
The demand curve labels and slope is?
Price, Quantity, Downward Sloping
The law of supply states
producers will supply more at a higher price and supply less at a lower price
The equilibrium price for chicken nuggets is $15 and the equilibrium quantity is 40. If the price is $12, what exists?
shortage
A point along the Production Possibilities Frontier means?
A point under the PPC means?
A point above the PPC means?
efficient and possible
inefficient and possible
impossible
When two nations specialize and trade according to the laws of comparative advantage, what would happen?
both nations increase consumption possibilities and increase their standard of living
This results in movement along the demand curve:
change in the price for that product
R.O.T.T.E.N. stands for?
Resource Price
Other goods
Technology
Taxes and Subsidies
Expectations
Number of Producers
An increase in demand and an increase in the supply will result in what equilibrium price?
indeterminant
PPC can illustrate the concepts of?
unemployment, opportunity cost, choice, scarcity, efficiency, output
For absolute advantage, do you always look at the largest number?
no: depends on type of problem
output: yes
input: no (least amount of resources)
M.E.R.I.T. stands for?
Market size
Expectations
Related goods
Income
Tastes and Preferences
Producers expect demand for hot cocoa to rise in the next few months as a polar vortex is headed to the region. The current supply curve will?
Producers expect demand to rise, so will plan to supply more in the future. Current supply curve will shift L
price - increase
quantity sold - decrease
Peter can mow 6 lawns and 3 pools. His opportunity cost of mowing one lawn is?
1 lawn = 1/2 pool
yes
An increase in the price of pepperonis will have what affect on the Demand Curve for mozzarella cheese?
increase in the price of a complement to mozzarella cheese (pepperoni - pizza) will cause the demand curve for mozzarella to shift L
A decrease in the price for turkey will have what affect on the Supply Curve for beef?
decrease in the price of a substitute to beef (turkey burgers vs beef burgers) will cause the supply curve for beef to shift R
For equilibrium price and quantity to decrease, what must happen to supply and demand?
demand - decrease
supply - no change
Draw a PPC curve for the following goods: DET Energy and lightbulbs
Plot a point to show the economy is in a recessionary gap.
DET Energy on the y-axis, lightbulbs on the x-axis, curved PPF, point under the curve
Ashna can produce 30 tons of food and 10 machines. Luna can produce 40 tons of food and 40 machines.
Absolute advantage in the production of machines is? Absolute advantage in the production of food is? A comparative advantage in the production of machines is? Who should import food? A mutually beneficial terms of trade is?
Luna
Luna
Luna
Luna imports food
1 machine = 1-3 food OR 1 food = 1/3 - 1 machine
Hot new item for children's Christmas toys - AI teddy bears - has been known to include Eminem's explicit content version of his album Revival.
Draw out what happens to the demand curve for AI teddy bears and explain why
Price (y-axis) Quantity (x-axis) Demand curve downward sloping
Shift L due to loss of Taste and Preference
Scientists discover a way to capture wind power from violent storms on Mars and transport it back to the Earth.
Draw out what happens to the supply curve for wind power and explain why
Price (y-axis) Quantity (x-axis) Supply curve upward sloping
Shift R due to increase in Technology
Gasoline is sold in a competitive market, the equilibrium price is $50 per barrel, and the equilibrium quantity is 1000 barrels.
A correctly labeled graph of the gasoline market at equilibrium looks like? At a price of $40 per barrel, a surplus or shortage would exist? Explain. The discovery of new oil wells would result in what change to the graph? If instead an increase in the price of gas cars occurs, what changes to the graph would occur? If both situations occur, the equilibrium price and quantity of gas would?
labels: P, Q, $50, 1,000, S, D
shortage: QS< QD
S shifts R, decrease EP, increase EQ
D shifts L
EP decrease, EQ indeterminate