EC 110 Study Guide - Final Guide: Price Ceiling, Comparative Advantage, Economic Surplus

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viridiancat493

27 Apr 2014

School

University of Alabama

Department

Economics

Course

EC 110

Professor

Kent Zirlott

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Document Summary

The following chapters and items will be on the final exam. 4 supply and demand (know everything in this chapter) 13 production and costs: know the definitions and concepts, know the various types of costs and how to calculate them, know the types of profit and how to calculate them, know the graphs from the chapter. 14 perfect competition: know the concepts and characteristics of this market, know the graphs associated with this market, know the short run and long run characteristics and conditions of this market. 15 monopoly: know the concepts and characteristics of this market, know the graphs associated with this market. The following items will randomly appear on different versions of the final exam. The following items will not be on the final exam: elasticity of supply, income elasticity, and cross price elasticity, price discrimination, monopolisitic competition, oligopolies, cartels, and game theory.

Related Questions

Price Elasticity		Income Elasticity		Cross-Price Elasticity
\|ep\| > 1	Elastic	ei < 0 ei > 0	Inferior good Normal good	ec < 0	Complementary good
\|ep\| < 1	Inelastic	0< ei < 1 ei > 1	Necessity Luxury	ec > 0	Substitute good
\|ep\| = 1	Unit Elastic

Technical Questions

Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -2.0; (2) The income elasticity of demand is 1.5; and, (3) The cross-price elasticity of a related good is -3.5. What can you determine about consumer demand for your product from this information?â¨â¨

Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -.9; (2) The income elasticity of demand is .5; and, (3) The cross-price elasticity of a related good is 2.0. What can you determine about consumer demand for your product from this information?

What are the three determinants of price elasticity of demand

What are the three determinants of price elasticity supply?

Name and describe the three kinds of product innovation.

Name and describe a marketing approach (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe a statistical approach (that we discussed in class) or technique that can be used to understand consumer behavior and/or estimate demand.

Name a psychological model (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe the six types of consumers.

How do fixed and variable costs differ in the short-run and long-run?

Jim is considering quitting his job and using his savings to start a small business. He expects that his costs will consist of a lease on the building, inventory, wages, electricity, and insurance.

11A. Identify which costs are explicit and which are opportunity (implicit) costs.

11B. Identify which costs are fixed and which are variable.

What is the law of diminishing returns? What are economies of scale and diseconomies of scale? Be sure to note the terms apply to the short run and the long run.

Application Questions

1. How can entrepreneurs shift elasticity of demand and elasticity of supply? Draw on the three determinants for each in your answer.

2. How can entrepreneurs be innovative in production for the short-term and the long-term? Draw on concepts like diminishing returns, diseconomies of scale, and economies of scale in your answer.

redfish597

I. When the question requires a supply or demand graph, you are required to draw the graph(s) to answer the question. Do not forget to label your graphs completely and correctly.

II. If the question has multiple parts, like a, b, and c; you need to draw a graph for each part that requires one and separate your answers as a, b, and c.

III. When you draw graphs, you are also required to label them completely in order to earn full credit for your answers.

Separate your answers with their question number.

Question 1: Patrick owns a bagel business in Seattle and he wants to increase his total revenue. He knows that when bagels are $1.00, he sells 250 an hour, and when lowers the price to $0.75 he sells 275 an hour.

a. Using the midpoint formula and showing your work, calculate the price elasticity of demand for Patrick's bagels.

b. Using the price elasticity of demand for Patrick's bagels, explain whether he should raise or lower the price to generate more revenue.

c. Andrew's bakery moves in across the street from Patrick's shop. Explain what is likely to happen to the price elasticity of demand for Patrick's bagels.

Question 2: If we know that the price elasticity of demand is:

a. 5, graph the demand curve.

b. 0.5, graph the demand curve.

c. infinite, graph the demand curve

Question 3: A firm knows that the price elasticity of demand for its service is 0 (zero).

a. Graph this demand curve.

b. What should the firm do to the price of its good to raise total revenue?

Question 4: In a recession, there are many unemployed workers. Employers find that when the price of labor is $9.00, the quantity supplied is 200 workers. When they lower the wage to $8.50, 175 workers are willing to work.

a. Using the midpoint formula and showing your work, calculate the price elasticity for workers.

b. Over time, technology becomes more efficient as a substitute for workers. What happens to a firm's demand for workers? Explain.

rosereindeer205

1- Explain the Law of Demand. What are their assumptions? What are demand curve shifters and what causes them to shift?

2- What is market equilibrium? What might keep the market from moving all the way to that equilibrium point?

3- âPrice control can be more effective in the short run than the long runâ. Explain. How could price controls affect a firmâs incentive to innovate? Explain.

4- What is price elasticity? Explain. What are various types of elasticity of demand? Explain with examples.

5- Suppose that a producer raises the price of a good from $8 to $15, and the quantity sold drops from 2500 to 400 units. Is the demand for the good is elastic or inelastic?

6- Define and explain perfect competition, monopoly and oligopoly. Why firms do price discrimination?

silvergnu415

EC 110 Study Guide - Final Guide: Price Ceiling, Comparative Advantage, Economic Surplus

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