Week 1 (Part 1) Introduction Econ 101

Size: px
Start display at page:

Download "Week 1 (Part 1) Introduction Econ 101"

Transcription

1 Week 1 (art 1) Introduction Econ 101 reliminary Concepts (Chapter 2 g & 47-50) Economics is the study of how individuals and societies choose to use scarce resources that nature and previous generations have provided. That is, how society conduct themselves in the market as buyers and sellers to solve the problem of scarcity. Studying economics is to learn a way of thinking. Economics involves the study of societal and global affairs concerning resource allocation. Microeconomics: Microeconomics is the branch of economics that examines the functioning of individual industries and the behaviour of individual decision making units (that is, firms and households). Microeconomics: Microeconomics the branch of economics that examines the economic behaviour of aggregates (income, output, employment, etc.) on a national scale. Scarce Resources: All resources are combined to produce good/services to satisfy human needs. Goods are usually tangible and services intangible. We want more goods/services to improve our standard of living. Labour: Skilled and unskilled. Land: Has a broad definition in economics. Includes all natural resources. Capital: Man made goods to produce other consumer goods. Enables us to produce in larger and larger quantities. Entrepreneurs: Special category of labour. Has certain attributes: Vision, enterprise, initiative, innovation & risk takers. They provide jobs and grow the economy. Trade Offs When there is scarcity, not all needs can be satisfied. Firms, households and individuals have to make trade-offs between competing objectives. These choices involve opportunity costs. Opportunity Cost: The opportunity cost is the next best alternative that we forgo, or give up, when we make a choice. It is the value of the next best choice. Opportunity costs arise because time and resources are scarce. There are limited resources but unlimited wants which leads to choice). Nearly all decisions involve trade-offs. Opportunity costs does not necessarily have to be measured in dollars (e.g. can be measured in terms of times as well). Marginalism Marginal refers to the last unit produced/consumed. In making a choice, it is important to weigh the costs and benefits that arise from a decision. For example, when deciding whether to produce the additional output, a firm considers only the additional (marginal) cost, not any sunk costs. Sunk Costs: Costs that cannot be avoided, regardless of what is done in the future because they have already incurred. It is an expenditure which you have already committed. Economists ignore sunk costs when making decisions because, by definition, sunk costs are not affected by decisions we are making now. Efficient Markets An efficient market is one in which profit opportunities are eliminated almost instantaneously. There is no free lunch. Somebody, somewhere has to pay for it. There is always a cost. rofit opportunities are rare because, at any one time, there are many people searching for them.

2 Week 1 (art 2) Demand, Supply and Market Equilibrium Econ 101 Market Forces of Supply & Demand (Chapter 3: Demand, Supply & rice) Economics deals with the allocation of scarce resources in the most optimal manner. This is done by the price mechanism or the market system. This is called the invisible hand of the price mechanism where resources are allocated and re-allocated automatically without any instructions from anyone. rice signals allow producers to produce what consumers want. Supply and demand are the forces that make market economics work. Much of modern microeconomics is about supply, demand and market equilibrium. Equilibrium is where supply equals demand. Market: Group of buyers and sellers of a particular good or service. The market could have a real form (e.g. shopping mall) or virtual form (e.g. website). The terms of supply and demand refer to the behaviour of people as they interact with one another in markets. Buyers determine demand. Sellers determine supply. Demand eople demand goods/services for satisfaction (utility). Demand is based on the need for satisfaction. Utility is a psychological concept and cannot be quantified but we use price to measure it. rice = Marginal Utility. There is the law of diminishing marginal utility - normally, the more we consume something, the less we want of it. Disutility is when MU becomes negative and TU decreases. The determinants of demand are: Market rice Consumer Income rice of Related Goods Tastes Expectations Law of Demand: The law of demand states that there is an inverse relationship between price and quantity demanded. So, as price increases, quantity demanded decreases. Law of demand is not always true but we only deal with situations where it applies. Demand Schedule: The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded. It shows the quantity a consumer chooses to buy at each price. Demand Curve: The demand curve is the downward sloping line relating price to quantity demanded. Ceteris aribus: Ceteris paribus is a Latin phrase that means all variables other than the ones being studied are assumed to be constant. Literally, ceteris paribus means other things being equal. The demand curve slops downward because, ceteris paribus, lower prices imply greater quantity demanded. Maths: The equation is expressed with: = c - mq where m = slope (rise/run) and c = y intercept.

3 Week 1 (art 2) Demand, Supply and Market Equilibrium Econ 101 Linear Approximation of Demand The demand curve is not necessarily a straight line. It is very possible (and quite likely) that the demand curve is non-linear - the relationship between price and quantity is more complex. However, it is possible to approximate a non-linear relationship by a straight line to make calculations easier. Market Demand: Market demand refers to the sum of all individual demands for a particular good or service. Graphically, individual demand curves/schedules are summed horizontally at each price to obtain the market demand curve. Horizontally as we want to add all the quantities for each given price. Market demand curves slope down because a lower prices causes each consumer to buy more and also new consumers enter the market. Shifts of the Demand Curve: Changes in the following factors shift the demand curve: rice of other goods (complements and substitutes) Income Taste Information Credit Availability (availability of loans - especially important for expensive goods such as houses, cars, etc.) Change in Demanded vs Change in Demand A change in quantity demanded is a movement along the demand curve caused by a change in the price of the product. A change in demand is a shift in the demand curve, either to the left or right. Caused by a determinant other than the price. Increase in Demand Increase in Demand D D D Q Q Q Q Substitutes & Complements Substitutes: Two goods are substitutes if a rise in the price of one increases demand for the other (e.g. butter and margarine). Complements: Two goods are complements if a rise in the price of one decreases demand for the other (e.g. DVD players and DVDs).

4 Week 1 (art 2) Demand, Supply and Market Equilibrium Econ 101 Changes in Income Normal Good: If demand for a good is positively related to income, it is called a normal good. Demand increases when incomes increase. Demand decreases when incomes fall. Inferior Good: If demand for a good is inversely related to income, it is called an inferior good. Demand decrease when income increases. Demand decreases when income decreases. Supply supplied is the amount of a good that sellers are willing and able to sell at each price. rofit for sellers is revenue - cost. Revenue is price x quantity. Sellers want to maximise profit. Law of Supply: The law of supply states that there is a direct (positive) relationship between price and quantity supplied. Determinants of Supply: Market rice Input rices Technology Expectations Number of roducers Credit Availability Supply Schedule: The supply schedule is a table that shows the relationship between the price of the good and the quantity supplied. Supply Curve: The supply curve is the upward sloping line relating price to quantity supplied. Supply Curve Equation: This will be an upwards sloping straight line. We write price as a function of quantity. = c + mq where m is the slope and c is the vertical intercept. Market Supply: Market supply refers to the sum of all individual suppliers for all sellers of a particular good or service. Graphically, individual supply curves are summed horizontally to obtain the market supply curve. Change in Supply vs Change in Supply Change in quantity supplied is a movement along the supply curve caused by a change in the market price of the product. Change in supply is a shift of the supply curve, either to the left or right. Caused by a change in a determinant other than price. Increase in Supplied Increase in Supply S S S Q Q Q Q

5 Week 2 Applications of Demand and Supply Econ 101 Applications of Demand and Supply (Chapter 4) Three steps to analysing changes in equilibrium: Decide whether the event shifts the supply or demand curve (or both). Decide whether the curve(s) shift(s) to the left or to the right. Examine how the shift affects the equilibrium price and quantity. What happens to the price and quantity when supply or demand shifts? Supply No Change Supply Increase Supply Decrease Demand No Change same Q same down Q up up Q down Demand Increase up Q up ambiguous Q up up Q ambiguous Demand Decrease down Q down down Q ambiguous ambiguous Q down Elasticity of Demand One measure of the responsiveness of quantity demanded to changes in the price of a good. It helps predict what will happen to the total revenue earned by the supplier if they raise or lower the price. IT depends on: Availability of substitutes Time rice at which it is evaluated Nature of good (essential or not) In general, the larger the price elasticity, the more sensitive quantity demanded is. Elasticity Analysis The price elasticity of demand is calculated as: % change in quantity demanded / % change in price Elasticity is a negative number, but we ignore the sign and focus on the absolute value. In general, the larger the price elasticity, the more sensitive the person s quantity demanded to price changes. Thus given any point on the demand curve (i.e. a price-quantity pair) we can calculate the elasticity of demand at that point by using the formula: (/Q) x (1/slope)

6 Week 2 Applications of Demand and Supply Econ 101 rice Elasticity of Supply Indicates how responsive quantity supplied is to price changes. Depends on: Time period. Gestation period is the time it takes to produce something from the moment the decision is made. Whether there is input that is fixed in quantity (if there is, supply will be very inelastic). rice at which elasticity is evaluated. Calculation: % change in quantity supplied / % change in price As for demand, the elasticity of supply at any pint can be expressed as: (/Q) x (1/slope) Cross-rice Elasticity of Demand Cross-price elasticity of demand is the response of quantity demanded of one product to a change in price of a related good. Cross-price elasticity of demand for X with respect to price of Y: % change in quantity demanded of good X / % change in the price of good Y Cross-price elasticity of demand can be positive, negative or 0. ositive: Shows the two goods are substitutes. Negative: Shows the two goods are complements. Zero: Shows the two goods are neither complements or substitutes. The higher the absolute value of cross-price elasticity, the stronger the complement/substitute relationship. Income Elasticity of Demand The response of quantity demanded of a good to changes in income is an important economic variable. In many economies, economic growth has been doubling real national income every 20 to 30 years. This rise in income is shared by most people. As they find their incomes increasing, people increase their demand for many products. In the richer countries, demand for food and basic clothing does not increase with income nearly so much as the demand for many other products. In many of these richer countries, the demands that are increasing most rapidly as incomes rise are the demand for durable goods. In an increasing number of the very richest of western countries, however, the demand for services is rising even more rapidly than the demand for durables as incomes rise. To summarise: There are 3 levels of goods/services: Necessities Durable goods Services

7 Week 3 (art 1) The Consumption Decision Econ 101 The Consumption Decision (Chapter 5) The problem of choice. Consumers have a fixed amount of money to allocate between different goods and services (as well as saving). The Budget Constraint Before we can think about what a person will choose, we have to consider what they can afford. The opportunity set consists of the combination of goods a person can afford. It depends on: Income rice of each good Individual Budget Constraint The budget constraint graphs the frontier of the opportunity set when only two goods are available. The budget constraint is always a straight line with a negative slope. Suppose an individual consumes only two goods: X and Y. Good X: rice is $20 (per unit) Good Y: rice is $10 (per unit) Consumer has $100 to spend. Good Y Good X If they spend all their money on Good X, they can afford 5 (100/20). If they spend all their money on Good Y, they can afford 10 (100/10). We will typically focus only on the absolute value of the slope. Slope = rise/run = (income/ Y )/(income/ X ) = X / Y (in absolute terms) The slope is the ratio of prices. All combinations under the constraint are affordable (in this case, cost less than $100). We should also always assume more consumption leads to more satisfaction (utility).

1. T F The resources that are available to meet society s needs are scarce.

1. T F The resources that are available to meet society s needs are scarce. 1. T F The resources that are available to meet society s needs are scarce. 2. T F The marginal rate of substitution is the rate of exchange of pairs of consumption goods or services to increase utility

More information

Microeconomics PART A. More Tutorial at

Microeconomics PART A.  More Tutorial at Microeconomics PART A 1. For Italy, the opportunity cost incurred when 6 cheeses are produced is 8 watches. For Switzerland, the opportunity cost incurred when 10 cheeses are produced is 50 watches. Which

More information

WEEK 4: Economics: Foundations and Models

WEEK 4: Economics: Foundations and Models WEEK 4: Economics: Foundations and Models Economics: study of the choices people and societies make to attain their unlimited wants, given their scarce resources Market: group of buyers and seels of good

More information

1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price

1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price 1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price 2. The two things needed for demand to exist are: willingness

More information

1.3. Levels and Rates of Change Levels: example, wages and income versus Rates: example, inflation and growth Example: Box 1.3

1.3. Levels and Rates of Change Levels: example, wages and income versus Rates: example, inflation and growth Example: Box 1.3 1 Chapter 1 1.1. Scarcity, Choice, Opportunity Cost Definition of Economics: Resources versus Wants Wants: more and better unlimited Versus Needs: essential limited Versus Demand: ability to pay + want

More information

Chapter 4 DEMAND. Essential Question: How do we decide what to buy?

Chapter 4 DEMAND. Essential Question: How do we decide what to buy? Chapter 4: Demand Section 1 Chapter 4 DEMAND Essential Question: How do we decide what to buy? Key Terms demand: the desire to own something and the ability to pay for it law of demand: consumers will

More information

Multiple Choice Part II, A Part II, B Part III Total

Multiple Choice Part II, A Part II, B Part III Total SIMON FRASER UNIVERSITY ECON 103 (2007-2) MIDTERM EXAM NAME Student # Tutorial # Multiple Choice Part II, A Part II, B Part III Total PART I. MULTIPLE CHOICE (56%, 1.75 points each). Answer on the bubble

More information

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2 Economics 2 Spring 2016 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 2 1.a. Recall that the price elasticity of supply is the percentage change in quantity supplied divided

More information

Demand - the desire, ability, and willingness to buy a product.

Demand - the desire, ability, and willingness to buy a product. Demand - the desire, ability, and willingness to buy a product. 1. You must have the desire for the product 2. You must be able to make a purchase 3. You must be willing to make a purchase 4. Purchases

More information

+ What is Economics? societies use scarce resources to produce valuable commodities and distribute them among different people

+ What is Economics? societies use scarce resources to produce valuable commodities and distribute them among different people ECONOMICS The word economy comes from a Greek word oikonomia for one who manages a household. is the study of how society manages its scarce resources. Traditionally land, labor, and capital resources

More information

UNIT 2 CONSUMER'S BEHAVIOUR & THEORY OF DEMAND POINTS TO REMEMBER Consumer : is an economic agent who consumes final goods and services. Total utility : It is the sum of satisfaction from consumption of

More information

1 of 14 5/1/2014 4:56 PM

1 of 14 5/1/2014 4:56 PM 1 of 14 5/1/2014 4:56 PM Any point on the budget constraint Gives the consumer the highest level of utility. Represent a combination of two goods that are affordable. Represents combinations of two goods

More information

ECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Introduction Towson University 1 / 69

ECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Introduction Towson University 1 / 69 ECON 202 - MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University J.Jung Chapter 2-4 - Introduction Towson University 1 / 69 Disclaimer These lecture notes are customized for the Macroeconomics

More information

CLEP Microeconomics Practice Test

CLEP Microeconomics Practice Test Practice Test Time 90 Minutes 80 Questions For each of the questions below, choose the best answer from the choices given. 1. In economics, the opportunity cost of an item or entity is (A) the out-of-pocket

More information

UNIT 4 PRACTICE EXAM

UNIT 4 PRACTICE EXAM UNIT 4 PRACTICE EXAM 1. The prices paid for resources affect A. the money incomes of households in the economy B. the allocation of resources among different firms and industries in the economy C. the

More information

MICRO-ECONOMIC THEORY I STUDY NOTES CHAPTER ONE

MICRO-ECONOMIC THEORY I STUDY NOTES CHAPTER ONE MICRO-ECONOMIC THEORY I STUDY NOTES CHAPTER ONE UNIT 1 BASIC CONCEPT OF CONSUMER BEHAVIOUR CHAPTER ONE CONTENTS Introduction Objectives Main Content Theory of Consumer Behaviour Consumer Preferences Decisiveness

More information

Perfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product.

Perfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product. Perfect Competition In this section of work and the next one we derive the equilibrium positions of firms in order to determine whether or not it is profitable for a firm to produce and, if so, what quantities

More information

Introduction Question Bank

Introduction Question Bank Introduction Question Bank 1. Science of wealth is the definition given by 2. Economics is the study of mankind of the ordinary business of life given by 3. Science which tells about what it is & what

More information

CHAPTER 2: DEMAND AND SUPPLY

CHAPTER 2: DEMAND AND SUPPLY 2.3 THE MARKET CHAPTER 2: DEMAND AND SUPPLY CIA4U Ms. Schirk A market can be: A physical place where goods are bought and sold A collective reference to all the buyers and sellers of a particular good

More information

Test Yourself: Basic Terminology. If all economists were laid end to end, they would still not reach a conclusion. GB Shaw

Test Yourself: Basic Terminology. If all economists were laid end to end, they would still not reach a conclusion. GB Shaw Test Yourself: Basic Terminology If all economists were laid end to end, they would still not reach a conclusion. GB Shaw What is economics? What is macroeconomics? What is microeconomics? Economics is

More information

Lesson-9. Elasticity of Supply and Demand

Lesson-9. Elasticity of Supply and Demand Lesson-9 Elasticity of Supply and Demand Price Elasticity Businesses know that they face demand curves, but rarely do they know what these curves look like. Yet sometimes a business needs to have a good

More information

Submit your scantron and questions sheet

Submit your scantron and questions sheet PRINT YOUR NAME Exam 1 Submit your scantron and questions sheet Version A 1. Scarcity means that A) what we can produce with our resources is greater than our material wants B) resources are unlimited

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2 Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose

More information

Perfect Competition CHAPTER 14. Alfred P. Sloan. There s no resting place for an enterprise in a competitive economy. Perfect Competition 14

Perfect Competition CHAPTER 14. Alfred P. Sloan. There s no resting place for an enterprise in a competitive economy. Perfect Competition 14 CHATER 14 erfect Competition There s no resting place for an enterprise in a competitive economy. Alfred. Sloan McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

More information

ASSIGNMENT 2 ND SEMESTER : MICROECONOMICS (MIC) ECONOMICS 2 (ECO201)

ASSIGNMENT 2 ND SEMESTER : MICROECONOMICS (MIC) ECONOMICS 2 (ECO201) Page 1 of 9 ASSIGNMENT 2 ND SEMESTER : MICROECONOMICS (MIC) ECONOMICS 2 (ECO201) STUDY UNITS COVERED : STUDY UNIT 1: Chapters 1, 2 STUDY UNIT 2: Chapters 7, 8, 9, 10 DUE DATE : 3:00 p.m. 20 AUGUST 2013

More information

Law of Supply. General Economics

Law of Supply. General Economics Law of Supply General Economics Supply Willing to Offer to the Market at Various Prices during Period of Time Able to Offer to the Market at Various Prices during Period of Time General Economics: Law

More information

Formula: Price of elasticity of demand= Percentage change in quantity demanded Percentage change in price

Formula: Price of elasticity of demand= Percentage change in quantity demanded Percentage change in price 1 MICRO ECONOMICS~ CHAPTER FOUR CHAPTER FOUR PRICE ELASTICITY OF DEMAND You know that when supply increases, the equilibrium price falls and the equilibrium quantity increases THE PRICE ELASTICITY OF DEMAND~

More information

Mechanism through which buyers (demanders) and sellers (suppliers) communicate to trade goods and services.

Mechanism through which buyers (demanders) and sellers (suppliers) communicate to trade goods and services. By the end of this learning plan, you will be able to: Use marginal (Cost-Benefit) analysis in decision-making Apply supply and demand analysis to price determination Assess the role price plays in a market

More information

Copyright 2010 Pearson Education Canada

Copyright 2010 Pearson Education Canada What are the effects of a high gas price on buying plans? You can see some of the biggest effects at car dealers lots, where SUVs remain unsold while sub-compacts sell in greater quantities. But how big

More information

DEMAND ANALYSIS. Samir K Mahajan, M.Sc, Ph.D.,UGC-NET Assistant Professor (Economics)

DEMAND ANALYSIS. Samir K Mahajan, M.Sc, Ph.D.,UGC-NET Assistant Professor (Economics) DEMAND ANALYSIS Samir K Mahajan, M.Sc, Ph.D.,UGC-NET Assistant Professor (Economics) DEMAND DETERMINANTS Demand determinants refer to the factors that affect demand for commodity (a consumer good), such

More information

Bremen School District 228 Social Studies Common Assessment 2: Midterm

Bremen School District 228 Social Studies Common Assessment 2: Midterm Bremen School District 228 Social Studies Common Assessment 2: Midterm AP Microeconomics 55 Minutes 60 Questions Directions: Each of the questions or incomplete statements in this exam is followed by five

More information

Chapter 1: The Ten Lessons in Economics

Chapter 1: The Ten Lessons in Economics Textbook Notes Page 1 Chapter 1: The Ten Lessons in Economics Saturday, 25 May 2013 1:09 PM Economics: The study of how society manages its scarce resources Individual Decision-Making Lesson 1: People

More information

Chapter 2 The Basics of Supply and Demand

Chapter 2 The Basics of Supply and Demand Chapter 2 The Basics of Supply and Demand Read Pindyck and Rubinfeld (2013), Chapter 2 Microeconomics, 8 h Edition by R.S. Pindyck and D.L. Rubinfeld Adapted by Chairat Aemkulwat for Econ I: 2900111 Chapter

More information

The law of supply states that higher prices raise the quantity supplied. The price elasticity of supply measures how much the quantity supplied

The law of supply states that higher prices raise the quantity supplied. The price elasticity of supply measures how much the quantity supplied In a competitive market, the demand and supply curve represent the behaviour of buyers and sellers. The demand curve shows how buyers respond to price changes whereas the supply curve shows how sellers

More information

CHAPTER THREE DEMAND AND SUPPLY

CHAPTER THREE DEMAND AND SUPPLY CHAPTER THREE DEMAND AND SUPPLY This chapter presents a brief review of demand and supply analysis. The materials covered in this chapter provide the essential background for most of the managerial economic

More information

Supply and Demand. Objective 8.04

Supply and Demand. Objective 8.04 Supply and Demand Objective 8.04 Supply and Demand Pages 258-259 259 copy bold terms and give a definition or description of each. Page 261 Copy the questions Worksheet A-2A 1. Surplus When the amount

More information

Short-Run Versus Long-Run Elasticity (pp )

Short-Run Versus Long-Run Elasticity (pp ) Short-Run Versus Long-Run Elasticity (pp. 38-46) Price elasticity varies with the amount of time consumers have to respond to a price Short-run demand and supply curves often look very different from their

More information

ECON 251 Exam 1 Pink Spring 2012

ECON 251 Exam 1 Pink Spring 2012 ECON 251 Exam 1 Pink Spring 2012 1. Which of the following is an example of the economic resource of capital? a. A $20 bill b. A corporate bond c. a government savings bond d. none of the above 2. John

More information

Demand and Supply. Chapter 2 pages 18-24, 27-3-, 33-34

Demand and Supply. Chapter 2 pages 18-24, 27-3-, 33-34 Demand and Supply Chapter 2 pages 18-24, 27-3-, 33-34 Markets Market- where buyers and sellers come together to carry out an economic transaction Markets can be physical places where goods/services are

More information

PPJNI" I IFIITIIBIH UI'IIVERSITY EXAMINER(S) FACULTY OF MANAGEMENT SCIENCES QUALIFICATION: BACHELOR OF ECONOMICS

PPJNI I IFIITIIBIH UI'IIVERSITY EXAMINER(S) FACULTY OF MANAGEMENT SCIENCES QUALIFICATION: BACHELOR OF ECONOMICS I IFIITIIBIH UI'IIVERSITY OF SCIENCE HI ID TECHNOLOGY FACULTY OF MANAGEMENT SCIENCES DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE QUALIFICATION: BACHELOR OF ECONOMICS QUALIFICATION CODE: 07BECO LEVEL:

More information

The Financial Market

The Financial Market In this presentation, we take a closer look at how the interest rate is determined in the financial market. The financial market consists of a demand for money, which is a positive function of the level

More information

Exam 01 - ECON Friday, October 1st

Exam 01 - ECON Friday, October 1st Name: ID: A Exam 01 - ECON 2301-05 - Friday, October 1st 1. Demand is said to be inelastic if the a. quantity demanded changes proportionately the same as price. b. quantity demanded changes proportionately

More information

Section I (20 questions; 1 mark each)

Section I (20 questions; 1 mark each) Foundation Course in Managerial Economics- Solution Set- 1 Final Examination Marks- 100 Section I (20 questions; 1 mark each) 1. Which of the following statements is not true? a. Societies face an important

More information

Econ Principles of Microeconomics - Assignment 1

Econ Principles of Microeconomics - Assignment 1 Econ 2302 - Principles of Microeconomics - Assignment 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. A likely effect of government policies that redistribute

More information

Macroeconomics, 10e (Parkin) Chapter 2 The Economic Problem. 1 Production Possibilities and Opportunity Cost

Macroeconomics, 10e (Parkin) Chapter 2 The Economic Problem. 1 Production Possibilities and Opportunity Cost Macroeconomics, 10e (Parkin) Chapter 2 The Economic Problem 1 Production Possibilities and Opportunity Cost 1) The production possibilities frontier is the boundary between A) those combinations of goods

More information

Chapter 6 Elasticity: The Responsiveness of Demand and Supply

Chapter 6 Elasticity: The Responsiveness of Demand and Supply hapter 6 Elasticity: The Responsiveness of emand and Supply 1 Price elasticity of demand measures: how responsive to price changes suppliers are. how responsive sales are to changes in the price of a related

More information

PRINCIPLES OF ECONOMICS PAPER 3 RD

PRINCIPLES OF ECONOMICS PAPER 3 RD PRINCIPLES OF ECONOMICS PAPER 3 RD Question 1 Objectives. Select appropriate alternative. (A) The meaning of the world Economic is most closely associated with the word. (a) Free (b) Scarce (c) Unlimited

More information

Econ 1 Review Session 1. with Maggie aproberts-warren UCSC Fall 2012

Econ 1 Review Session 1. with Maggie aproberts-warren UCSC Fall 2012 Econ 1 Review Session 1 with Maggie aproberts-warren UCSC Fall 2012 Introduction What will be covered in the exam? Chs. 1-8 What will the exam look like? 20 multiple choice questions 4 short answer/graphing

More information

FAQ: Decision-Making Strategies

FAQ: Decision-Making Strategies Q&A: Decision-Making Strategies Question 1: What is supply and demand? Answer 1: Supply refers to the actions of firms to create, distribute, and market goods and services. Firms create products that they

More information

Chapter 4: Demand Section 2

Chapter 4: Demand Section 2 Chapter 4: Demand Section 2 Objectives 1. Explain the difference between a change in quantity demanded and a shift in the demand curve. 2. Identify the factors that create changes in demand and that can

More information

Figure 4 1 Price Quantity Quantity Per Pair Demanded Supplied $ $ $ $ $10 2 8

Figure 4 1 Price Quantity Quantity Per Pair Demanded Supplied $ $ $ $ $10 2 8 Econ 101 Summer 2005 In class Assignment 2 Please select the correct answer from the ones given Figure 4 1 Price Quantity Quantity Per Pair Demanded Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8

More information

Unit I The Principles of Economics

Unit I The Principles of Economics Economics Chapters 1-2 & 4-6 Duke Chapter 1 Unit I The Principles of Economics Explain the difference between a need and a want. Explain the difference between goods and services. Scarcity - Find three

More information

ECON 251. Exam 1 Pink. Fall 2013

ECON 251. Exam 1 Pink. Fall 2013 ECON 251 1. By definition, opportunity cost is a. The value of the best alternative b. The sum of the value of all available alternatives c. The amount of money it takes to buy an item d. Always greater

More information

6) The mailing must be postmarked by June 15. 7) If you have any questions please me at

6) The mailing must be postmarked by June 15. 7) If you have any questions please  me at Examination Instructions: 1) Answer the examination only after you have read the honesty pledge below. 2) The multiple choice section will be taken in WebCT and a tutorial for using WebCT is to be found

More information

Econ 300: Intermediate Microeconomics, Spring 2014 Final Exam Study Guide 1

Econ 300: Intermediate Microeconomics, Spring 2014 Final Exam Study Guide 1 Econ 300: Intermediate Microeconomics, Spring 2014 Final Exam Study Guide 1 Chronological order of topics covered in class (to the best of my memory). Introduction to Microeconomics (Chapter 1) What is

More information

Demand & Supply of Resources

Demand & Supply of Resources Resource Markets 1 Demand & Supply of Resources Resource demand Firms demand resources As long as marginal revenue exceeds marginal cost To maximize profit Resource supply People supply resources To the

More information

Multiple Choice Questions Exam Econ 205 Pascal Courty MOCK MIDTERM

Multiple Choice Questions Exam Econ 205 Pascal Courty MOCK MIDTERM Multiple Choice Questions Exam Econ 205 Pascal Courty MOCK MIDTERM Instructions: This is a closed-book exam. There are 30 questions and you have 45 minutes. Each question has only one correct answer. A

More information

APEC 1101, Fall 2015 Tade Okediji

APEC 1101, Fall 2015 Tade Okediji APEC 1101, Fall 2015 Tade Okediji Yanghao Wang December 9, 2015 Contents I Lecture Note 1 1 September 14 th 1 1.1 What is Economics?................................ 1 1.2 Guide to Economic Reasoning............................

More information

Multiple choice questions 1-60 ( 1.5 points each)

Multiple choice questions 1-60 ( 1.5 points each) NAME: STUDENT ID: Final Exam ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your exam

More information

Ch. 7 outline. 5 principles that underlie consumer behavior

Ch. 7 outline. 5 principles that underlie consumer behavior Ch. 7 outline The Fundamentals of Consumer Choice The focus of this chapter is on how consumers allocate (distribute) their income. Prices of goods, relative to one another, have an important role in how

More information

Economics. In an economy, the production units are called (a) Firm (b) Household (c) Government (d) External Sector

Economics. In an economy, the production units are called (a) Firm (b) Household (c) Government (d) External Sector Economics The author of the book "The General Theory of Employment Interest and Money" is (a) Adam Smith (b) John Maynard Keynes (c) Alfred Marshall (d) Amartya Sen In an economy, the production units

More information

Jacob: W hat if Framer Jacob has 10% percent of the U.S. wheat production? Is he still a competitive producer?

Jacob: W hat if Framer Jacob has 10% percent of the U.S. wheat production? Is he still a competitive producer? Microeconomics, Module 7: Competition in the Short Run (Chapter 7) Additional Illustrative Test Questions (The attached PDF file has better formatting.) Updated: June 9, 2005 Question 7.1: Pricing in a

More information

Making choices in a world of scarcity means we must pass up some goods and services. Every decision we make is a trade-off:

Making choices in a world of scarcity means we must pass up some goods and services. Every decision we make is a trade-off: Lecture Notes Chapter 1 - The Art and Science of Economic Analysis Introduction Economics is about choices. Definition: Scarcity: A resource is scarce when it is not freely available - when its price exceeds

More information

EC 201 Lecture Notes 1 Page 1 of 1

EC 201 Lecture Notes 1 Page 1 of 1 EC 201 Lecture Notes 1 Page 1 of 1 ECON 201 - Macroeconomics Lecture Notes 1 Metropolitan State University Allen Bellas The textbooks for this course are Macroeconomics: Principles and Policy by William

More information

Eastern Mediterranean University Faculty of Business and Economics Department of Economics Spring Semester

Eastern Mediterranean University Faculty of Business and Economics Department of Economics Spring Semester Eastern Mediterranean University Faculty of Business and Economics Department of Economics 2015 16 Spring Semester ECON101 Introduction to Economics I First Midterm Exam Duration: 90 minutes Answer Key

More information

Ecn Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman. Final Exam

Ecn Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman. Final Exam Ecn 100 - Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman Final Exam You have until 12:30pm to complete this exam. Be certain to put your name,

More information

Chapter Summary and Learning Objectives

Chapter Summary and Learning Objectives CHAPTER 11 Firms in Perfectly Competitive Markets Chapter Summary and Learning Objectives 11.1 Perfectly Competitive Markets (pages 369 371) Explain what a perfectly competitive market is and why a perfect

More information

Unit 4: Consumer choice

Unit 4: Consumer choice Unit 4: Consumer choice In accordance with the APT programme the objective of the lecture is to help You to: gain an understanding of the basic postulates underlying consumer choice: utility, the law of

More information

After studying this chapter you will be able to

After studying this chapter you will be able to 3 Demand and Supply After studying this chapter you will be able to Describe a competitive market and think about a price as an opportunity cost Explain the influences on demand Explain the influences

More information

- Scarcity leads to tradeoffs - Normative statements=opinion - Positive statement=fact with evidence - An economic model is tested by comparing its

- Scarcity leads to tradeoffs - Normative statements=opinion - Positive statement=fact with evidence - An economic model is tested by comparing its Macroeconomics Final Notes: CHAPTER 1: What is economics? We want more than we can get. Our inability to satisfy all of our wants is called scarcity. All resources are finite even if they are abundant.

More information

THE TWO MAIN MARKET FORCES: DEMAND AND SUPPLY. Instructor: Ghislain Nono Gueye

THE TWO MAIN MARKET FORCES: DEMAND AND SUPPLY. Instructor: Ghislain Nono Gueye THE TWO MAIN MARKET FORCES: DEMAND AND SUPPLY Instructor: Ghislain Nono Gueye 1 The concept of demand You demand a good/service when you: - Want it - Can afford it - Plan to buy it You are not demanding

More information

Chapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting

Chapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting Microeconomics Modified by: Yun Wang Florida International University Spring, 2018 1 Chapter 13 Monopolistic Competition: The Competitive Model in a More Realistic Setting Chapter Outline 13.1 Demand and

More information

Chapter 2: The Basic Theory Using Demand and Supply. Multiple Choice Questions

Chapter 2: The Basic Theory Using Demand and Supply. Multiple Choice Questions Chapter 2: The Basic Theory Using Demand and Supply Multiple Choice Questions 1. If an individual consumes more of good X when his/her income doubles, we can infer that a. the individual is highly sensitive

More information

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1 1 Name Introduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1 There is only ONE best, correct answer per question. Place your answer on the attached sheet.

More information

Demand- how much of a product consumers are willing and able to buy at a given price during a given period.

Demand- how much of a product consumers are willing and able to buy at a given price during a given period. Ch. 4 Demand Ch. 4.1 The Demand Curve (Learning Objective- explain the Law of Demand) In your world- What are the goods and services that you demand? What happens to your buying when the price goes up

More information

ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING 2 MARKS

ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING 2 MARKS ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING 2 MARKS 1. What is managerial economics? It is the integration of economic theory with business practice for the purpose of facilitating decision making and

More information

Chapter 3 Quantitative Demand Analysis

Chapter 3 Quantitative Demand Analysis Chapter 3 Quantitative Demand Analysis EX1: Suppose a 10 percent price decrease causes consumers to increase their purchases by 30%. What s the price elasticity? EX2: Suppose the 10 percent decrease in

More information

Commerce 295 Midterm Answers

Commerce 295 Midterm Answers Commerce 295 Midterm Answers October 27, 2010 PART I MULTIPLE CHOICE QUESTIONS Each question has one correct response. Please circle the letter in front of the correct response for each question. There

More information

not to be republished NCERT Chapter 6 Non-competitive Markets 6.1 SIMPLE MONOPOLY IN THE COMMODITY MARKET

not to be republished NCERT Chapter 6 Non-competitive Markets 6.1 SIMPLE MONOPOLY IN THE COMMODITY MARKET Chapter 6 We recall that perfect competition was theorised as a market structure where both consumers and firms were price takers. The behaviour of the firm in such circumstances was described in the Chapter

More information

AS/ECON AF Answers to Assignment 1 October 2007

AS/ECON AF Answers to Assignment 1 October 2007 AS/ECON 4070 3.0AF Answers to Assignment 1 October 2007 Q1. Find all the efficient allocations in the following 2 person, 2 good, 2 input economy. The 2 goods, food and clothing, are produced using labour

More information

EC1010 Introduction to Micro Economics (Econ 6003)

EC1010 Introduction to Micro Economics (Econ 6003) Cork Institute of Technology (Institiuid Teicneolaiochta Chorcai) Alternative Semester 1 Examination 2007/2008 (Winter 2007) EC1010 Introduction to Micro Economics (Econ 6003) (Time: 2 Hours) External

More information

Elasticity and Its Applications. Copyright 2004 South-Western

Elasticity and Its Applications. Copyright 2004 South-Western Elasticity and Its Applications 5 Copyright 2004 South-Western Copyright 2004 South-Western/Thomson Learning Elasticity... allows us to analyze supply and demand with greater precision. is a measure of

More information

Econ 101: Principles of Microeconomics

Econ 101: Principles of Microeconomics Econ 101: Principles of Microeconomics Ch. 3: Supply and Demand: A Model of a Competitive Market Fall 2010 Herriges (ISU) Chapter 3: Supply and Demand Fall 2010 1 / 37 Outline 1 The Demand Curve Building

More information

Chapter 4: Understanding Demand

Chapter 4: Understanding Demand SCHS SOCIAL STUDIES What you need to know UNIT TWO 1. What a competitive market is and how it is described by the supply and demand model 2. What a supply curve shows 3. The difference between a movement

More information

Multiple Choice Identify the letter of the choice that best completes the statement or answers the question.

Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. Final day 2 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. What determines how a change in prices will affect total revenue for a company?

More information

Graded exercise questions. Level (I, ii, iii)

Graded exercise questions. Level (I, ii, iii) Graded exercise questions Level (I, ii, iii) 248 MICRO ECONOMICS LEVEL 1 GRADED EXERCISE QUESTIONS (LEVEL I, II, III) INTRODUCTION 1. Why does an economic problem arise? 2. What is economics about? 3.

More information

a. Sells a product differentiated from that of its competitors d. produces at the minimum of average total cost in the long run

a. Sells a product differentiated from that of its competitors d. produces at the minimum of average total cost in the long run I. From Seminar Slides: 3, 4, 5, 6. 3. For each of the following characteristics, say whether it describes a perfectly competitive firm (PC), a monopolistically competitive firm (MC), both, or neither.

More information

Economics: Canada in the Global Environment, Ninth Edition Chapter 2: The Economic Problem

Economics: Canada in the Global Environment, Ninth Edition Chapter 2: The Economic Problem Chapter 2 The Economic Problem Economics: Canada in the Global Environment, Ninth Edition 2.1 Production Possibilities and Opportunity Cost 1) The production possibilities frontier A) is the boundary between

More information

Econ 2113: Principles of Microeconomics. Spring 2009 ECU

Econ 2113: Principles of Microeconomics. Spring 2009 ECU Econ 2113: Principles of Microeconomics Spring 2009 ECU Chapter 12 Monopoly Market Power Market power is the ability to influence the market, and in particular the market price, by influencing the total

More information

Intermediate Microeconomics Spring 2005 Midterm Exam

Intermediate Microeconomics Spring 2005 Midterm Exam Intermediate Microeconomics Spring 2005 Midterm Exam K. Yamamoto Answer all the questions in the sections A and B. For the section C, answer any two (2) questions. A. 1.Use the following two statements

More information

Market Equilibrium, the Price Mechanism and Market Efficiency. Chapter 3

Market Equilibrium, the Price Mechanism and Market Efficiency. Chapter 3 Market Equilibrium, the Price Mechanism and Market Efficiency Chapter 3 Equilibrium Equilibrium is defined as a state of rest, self-perpetuating in the absence of any outside disturbance. Example: a book

More information

1. Supply and demand are the most important concepts in economics.

1. Supply and demand are the most important concepts in economics. Page 1 1. Supply and demand are the most important concepts in economics. 2. Markets and Competition a. Def: Market is a group of buyers and sellers of a particular good or service. P. 66. b. Def: A competitive

More information

Eco 300 Intermediate Micro

Eco 300 Intermediate Micro Eco 300 Intermediate Micro Instructor: Amalia Jerison Office Hours: T 12:00-1:00, Th 12:00-1:00, and by appointment BA 127A, aj4575@albany.edu A. Jerison (BA 127A) Eco 300 Spring 2010 1 / 61 Monopoly Market

More information

AP/IB Economics Unit 2.1: Supply, Demand and Equilibrium. Welker's Wikinomics 1

AP/IB Economics Unit 2.1: Supply, Demand and Equilibrium. Welker's Wikinomics  1 Unit 2.1 Unit Overview Markets Definition of markets with relevant local, national and international examples Brief descriptions of perfect competition, monopoly and oligopoly as different types of market

More information

Chapter 4:2: SECTION 2 SHIFTS IN DEMAND CURVE:

Chapter 4:2: SECTION 2 SHIFTS IN DEMAND CURVE: Chapter 4:2: SECTION 2 SHIFTS IN DEMAND CURVE: Objectives: We will study the factors that create changes in demand that can cause a shift in the demand curve. Give an example of how a change in demand

More information

Chapter Outline. Chapter 3 The Concept of Elasticity and Consumer and Producer Surplus. Elasticity. Elasticity Labels

Chapter Outline. Chapter 3 The Concept of Elasticity and Consumer and Producer Surplus. Elasticity. Elasticity Labels Chapter Outline Chapter The Concept of Elasticity and Consumer and roducer Surplus ELSTICITY OF EMN LTERNTIVE WYS OF UNERSTNING ELSTICITY MORE ON ELSTICITY CONSUMER N ROUCER SURLUS Elasticity Elasticity:

More information

Econ 3144 Spring 2006 Test 1 Dr. Rupp 25 multiple choice questions (2 points each) & 5 discussion questions (10 points each)

Econ 3144 Spring 2006 Test 1 Dr. Rupp 25 multiple choice questions (2 points each) & 5 discussion questions (10 points each) Econ 3144 Spring 2006 Test 1 Dr. Rupp 25 multiple choice questions (2 points each) & 5 discussion questions (10 points each) Name Sign Pledge I have neither given nor received aid on this exam Multiple

More information

Market System. and purchase goods & services to satisfy material wants

Market System. and purchase goods & services to satisfy material wants 2 primary decision makers in market system: Market System Households (consumers) economic unit of one or more persons that provide resources and purchase goods & services to satisfy material wants Firms

More information

Microeconomics Celina Hagen

Microeconomics Celina Hagen Microeconomics Celina Hagen Opportunity Cost The opportunity cost is fundamental costs in economics, and is a benefit, profit, or value of something that must be given up to acquire or achieve something

More information