ECON 101 Study Guide - Final Guide: Demand Curve, Economic Equilibrium, Economic Surplus

81 views23 pages

turquoisegnu128

28 Sep 2018

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

sangriahare462 and 5 others unlocked

ECON 101 Full Course Notes

Verified Note

30 documents

Document Summary

Unless a question explicitly says otherwise, assume that all demand curves slope downward, all supply curves slope upward, and there are no externalities. For the true / false section, mark box a for true and box b for false. Each correct answer adds 2 points to your score. For the multiple choice section, mark the best answer choice. Each correct answer adds 5 points to your score. Each blank answer adds 1 point to your score. The bene ts resulting from a subsidy exceed the government"s subsidy payment. You don"t know anything about cars, so you take his advice: you"re on an overseas holiday and rent a car to do some sight seeing. When you collect the car, you choose to take the optional insurance coverage. You take the discount, even though you don"t have a garage: you want to buy a new tv, so head o to best buy.

Related Questions

The market for packets of cigarettes has been described by the following supply and demand functions:

Supply: P = 10 + 4Q Demand: P = 100 - 5Q where P is the price in dollars and Q is the quantity of packets of cigarettes per month (in thousands).

Part A) Construct a graph of supply and demand for this market showing all intercepts. What are the equilibrium prices and quantities? Show these on your graph.

Part B) At the market equilibrium price, what would be the total monthly revenue?

Part C) Calculate consumer surplus at the market equilibrium and indicate this surplus as an area on your diagram.

Part D) Calculate producer surplus at the market equilibrium and indicate this surplus as an area on your diagram.

Part E) Assume that a per-unit tax of $9.00 per packet of cigarettes is imposed by the government on the suppliers of cigarettes. Depict this on your demand and supply diagram. (Hint: the new tax inclusive supply function will be: P = 19 + 4Q). What is the new market equilibrium quantity? What price will consumers now pay and what price will suppliers now receive?

Part F) How much is the government revenue from the tax on suppliers?

Part G) Calculate consumer surplus and producer surplus after the imposition of the tax and any deadweight loss associated with the tax. Indicate these surplus and tax revenue areas on your diagram. Explain what the deadweight loss represents.

Part H) Now assume that instead of imposing a per-unit tax of $9.00 per pack on the suppliers of cigarettes the government decides to apply the same per-unit tax of $9.00 on consumers. Depict this on your demand and supply diagram. (Hint: the new tax inclusive demand function will be: P = 91 - 5Q) What is the new market equilibrium quantity? What price will consumers now pay and what price will suppliers now receive? (5 marks)

Part I) How much is the government revenue from the tax on consumers? (1 mark)

Part J) Who bears the greatest burden of the tax in each case, producers or consumers? Does your answer depend on whether the tax is levied on producers or consumers?

I am really having difficulty understanding Part J - can that please be answered with some detail?

carminewildebeest911

For the next three questions, be sure to draw out the figure yourself on scratch paper. It will help you get the correct answers. The equation for the demand curve is D = 100 - P. That means that the intercept on the price axis is 100, and the intercept on the quantity axis is also 100. The slope of the demand curve is -1. The equation for the supply curve is S = 9*P. That means that the supply curve begins at the origin, and increases with a slope of 9. For example, if the price is $1, the quantity supplied is 9. If the price is $20, the quantity supplied is 180. If you draw these curves you will notice that the intersection of supply and demand occurs at a price of $10 and a quantity of 90. That is the market equilibrium. We will call it the autarkic equilibrium in this market. For this question, what is the consumer surplus? There is no need to put a dollar sign in your answer. Just write the number.

ivoryminnow720

Are the following statements true or false? A simple yes-no answer will not suffice. Explain, with the use of diagrams where necessary.

1. The utility function u(a, b) = aâ0.2 b0.8 violates the non-satiation assumption.

2. If a consumer is a net borrower, an increase in the interest rate must reduce his borrowing, if consumption in each date is a normal good.

3. If a good has income elasticity less than one, it is inferior.

4. If the demand curve for good A is everywhere flatter than that of good B, then good A has a higher price elasticity of demand.

5. If a given set of consumer preferences are transitive, then there must be an infinite number of indifference curves describing those preferences.

6. If there are two goods, A and B, and A is Giffen, then B must be a price-substitute for A.

Please answer all 6 true/false questions and explain your asnwer. Use diagrams when necessary to explain your answer.

ECON 101 Study Guide - Final Guide: Demand Curve, Economic Equilibrium, Economic Surplus

ECON 101 Full Course Notes

Document Summary

Get access

Related Documents

ECON 101 Study Guide - Midterm Guide: Deadweight Loss, Economic Surplus, Externality

ECON 101 Study Guide - Midterm Guide: Deadweight Loss, Economic Surplus, Externality

ECON 101 Study Guide - Midterm Guide: Deadweight Loss, Marginal Revenue, Economic Surplus

Related Questions