ECO101H1 Lecture 11: Lecture 11-Review
Thursday, October 22nd, 2009.
Review
Opportunity Costs
You choose to attend university for one year. Tuition and books cost $5000. Room and
board cost $7500. What is the opportunity cost of attending university if next best
alternative is:
1) To work and earn $25000 while living at home, where room and board is free
$12,500
25,000
$37,500
2) To work and earn $25000 while sharing an apartment and paying $7500 for room
and board $ 5,000
25,000
$30,000
3) to travel for a year, which is free because your uncle will pay
$12500
Satisfaction from Travel
4) to travel for a year, which will cost $20,000
$12,500
Satisfaction - 20,000
Satisfaction - $7,500
The following are the elasticities for Volkswagen Beetles:
Price elasticity of demand = 2
Income elasticity of demand = 1.5
The supply of Beetles is elastic.
True or False?
a. A 10% increase in the price of a Beetle will reduce the quantity demanded by
20% (T)
b. An increase in consumer income will increase the price and quantity of Beetles.
Since price elasticity of demand is greater than 1, total revenue will go down. (F)
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ECO101H1 Full Course Notes
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Document Summary
You choose to attend university for one year. What is the opportunity cost of attending university if next best alternative is: to work and earn while living at home, where room and board is free. ,500: to work and earn while sharing an apartment and paying for room and board. ,000: to travel for a year, which is free because your uncle will pay. Satisfaction from travel: to travel for a year, which will cost ,000. The following are the elasticities for volkswagen beetles: True or false: a 10% increase in the price of a beetle will reduce the quantity demanded by. 20% (t: an increase in consumer income will increase the price and quantity of beetles. Since price elasticity of demand is greater than 1, total revenue will go down. (f) www. notesolution. com. Tr1 = p1 * q1 > tr0 = p0 * q0.
