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microeconomics
Microeconomics In Context 4th Edition Neva Goodwin , Jonathan M. Harris, Julie A. Nelson , Pratistha Joshi Rajkarnikar , Brian Roach , Mariano Torras - Solutions
7. How is market consumer surplus represented in a supply-and-demand graph?
6. How is consumer surplus for an individual consumer represented in a supply-and-demand graph?
5. What does ea point on a demand curve represent?
4. What is another name for a demand curve, in reference to welfare analysis?
3. What is a marginal ange?
2. Define consumer surplus.
1. What is the difference between social welfare and well-being?
2. Considering everything that we have covered so far in the book, have you anged your mind about any policy issues in your country? What lessons from the book do you find particularly relevant to current policy debates?
1. Do you think that the current level of government regulation is too high or too low? Do you generally support a laissez-faire approa to regulation, or more extensive regulation? Does your answer ange depending on the policy issue under consideration?
2. Do you think that social efficiency is an appropriate tool for analyzing the net impact of different policies? Can you think of some policy situations in whi social efficiency is a sufficient measure for determining whi policies should be enacted? Can you think of other policy situations
1. Think of another real-world example of a price floor or a price ceiling, not discussed in the text. Based on what you read in this section, as well as your own views, do you think that price regulation is a“good” policy?
2. Have you ever operated a business, even a small one, su as a lemonade stand, when you were younger? If so, what factors motivated you to start a business? Do you think that your profits(producer surplus) overstated or understated your benefits? Does your answer have any implications for
1. Do you think that the concept of producer surplus accurately represents the benefits that producers obtain from selling goods and services? Do you have any reservations about the concept?
2. Do you think that the concept of consumer surplus is an effective tool for converting “psyic”benefits to a monetary value? Do you have any reservations about the concept?
1. ink about a good or service that you have purased recently. Try to estimate the maximum amount that you would have been willing to pay for it. What factors influenced your WTP decision?How do you think your willingness to pay might differ from that of other consumers?
2. ink of a government policy that is currently being debated in the news. Describe how you would evaluate the costs and benefits of this policy differently if you were concerned primarily about social welfare or social well-being.
1. Do you believe, in principle, that the costs and benefits of various policies can be quantified in monetary terms? Do you believe that some impacts cannot be fundamentally measured in dollars?How would you suggest that we evaluate these impacts?
9. Mat ea concept in Column A with the corresponding fact or example in Column B. Column A a. Price-inelastic demand Column B 1. Income elasticity of 1.4
8. Look at the estimated price elasticities of demand for cigarees in Table 4.3. If the government of a high-income country raises taxes on cigarees, the price to consumers goes up. e extra revenue collected from the higher price goes to the government. Describe in a few sentences the
7. Many environmentalists think that an increase in the price of petroleum products to consumers would be a good thing. Many policymakers believe that an increase in the price of higher education (say, through increased tuitions), however, would be a bad thing. Discuss why these beliefs might be
6. Clark Marketing Services has found, through market tests, that the demand for Sonya’s Peanuts has a price elasticity of demand of 0.5 and an income elasticity of 1.8. You, an economist employed by Sonya’s Peanuts, have been asked by the executives of the company to explain what this means
5. Use the formulas for elasticity to answer the following questions.a. When Mariba’s income rises by 10 percent, her expenditures on carrots rise 12 percent.What is Mariba’s income elasticity of demand for carrots? Are carrots, for her, a normal or an inferior good?b. Suppose that the price
4. Braeburn Publishing decides to try to cut its costs of printing books by cuing the price that it offers to companies that supply it with paper.a. Suppose that the supply is perfectly price inelastic (at least in the short run), because Braeburn buys the entire output of the Morales Paper
3. Calculate the percentage ange in revenue that would result from ea of the actions in question 2 above. Assume that the initial price in all cases is $100 per unit, and the initial quantity demanded is 1,000 units.
2. Calculate the price elasticity of demand for the following cases:a. When price rises by 5 percent, quantity demanded drops by 10 percent.b. When price rises by 10 percent, quantity demanded drops by 2 percent.c. When price rises by 0.05 percent, quantity demanded drops by 99 percent. (Whi
1. For ea of the following items, discuss whether you think the demand that the seller faces will be price inelastic or price elastic, and explain why.a. A new song by an extremely popular recording artistb. One share of sto, when there are millions of shares for that company outstandingc.
17. Explain why the long-run elasticity of demand for a good may differ from the short-run elasticity.
16. Explain how a price ange has both “income effects” and “substitution effects” on buyer behavior.
15. Can you illustrate the income elasticity of demand using a single demand curve? Why or why not?
14. Give one example of a normal good and one example of an inferior good.
13. What is the income elasticity of demand?
12. What is the equation for calculating the price elasticity of supply?
11. Sket, on a single graph, a relatively price-elastic supply curve and a relatively price-inelastic supply curve. (Make sure that they go through the same point.)
10. What are examples of goods that are price elastic? What are some examples of price-inelastic goods?
9. Describe quantity and revenue responses to price anges when the price elasticity of demand takes on the following values: (a) 0, (b) between 0 and –1, (c) –1, (d) more elastic than –1.
8. How can we represent revenues on a graph?
7. What is the relationship between price elasticity of demand and how a firm’s revenues ange as itanges its prices?
6. Is elasticity the same thing as the slope of a curve?
5. How does elasticity ange along a linear demand curve?
4. What does a perfectly inelastic demand curve look like? What does a perfectly elastic demand curve look like?
3. What is the “tenical definition” of a price-elastic demand? What is the tenical definition of a price-inelastic demand?
2. What is the formula for the price elasticity of demand?
1. List three reasons why the demand for a good or service may be elastic. List three reasons why the demand for a good may be inelastic.
2. Suppose that new tenological breakthroughs make solar water heaters extremely eap to purase and operate, compared with water heaters that use fossil fuels. Illustrate on a graph what you might expect the short-run and long-run demand adjustments to this price drop to be. What sorts of
1. Maria rents on a month-to-month basis an apartment that she can barely afford, in a market where apartments are hard to find. Her landlord announces that she is doubling the rent, effective immediately. What is likely to be Maria’s short-run response (say, over the next few days or weeks)?What
2. Suppose that the prices of all goods and services available to a particular consumer go up by 20 percent, at the same time, while the consumer’s income (or budget) remains unanged. What is the effect on the buyer’s purase of normal goods? Of inferior goods? Is there a substitution
1. Whi of the following might be inferior goods? Could they be normal goods at some income levels and inferior goods at others?a. A community college educationb. Cigareesc. BMW carsd. Supermarket foode. Restaurant food
2. Whi goods might be normal goods at some income levels but inferior goods at other income levels?(Hint: You might think of a household that is desperately poor, then becomes moderately poor, and eventually becomes middle income.)
1. Suppose that your income increases. Whi goods and services would you buy more of (i.e., normal goods)? Whi goods and services would you buy less of (i.e., inferior goods)?
2. Economists draw supply curves as upward sloping. But sometimes, as consumers, we notice that the price per unit goes down if we buy more of something, not up. For example, a liter bole of Pepsi costs less per ounce than a can of Pepsi, warehouse stores sell breakfast cereal in “jumbo
1. Suppose that a government alternative-energy program is having difficulty hiring enough engineers to work on a project, and so it raises the wage that it offers to pay by 15 percent. Who are the buyers in this case? Who are the sellers? How would we show the wage increase on a supply-and-demand
2. Suppose that when Winged Demons Athletic Shoes offers a 15 percent discount on its latest model of shoe, it finds that it sells 20 percent more of them. Calculate the price elasticity of demand for these shoes. Describe whether demand is price elastic or price inelastic, and describe what
1. Consider the goods and services for whi estimated elasticity values are given in Table 4.3. Can youthink of some reasons why the demand for cigarees, eggs, and rice is inelastic? Can you think of an explanation for the two different elasticity values for so drinks?
9. Match each concept in Column A with an example in Column B. Column A a. Substitute goods b. A nonprice determinant of demand c. A nonprice determinant of supply d. Markup pricing e. Positive relationship f. Negative relationship g. Inadequacy h. Complementary goods Column B 1. Price and
8. Suppose that a newspaper report indicates that the price of wheat has fallen. For ea of the following events, draw a supply-and-demand graph showing the event’s effect on the market for wheat. en state whether the event could explain the observed fall in the price of wheat.a. A drought
7. At a price of $8 per tiet, Shalimar goes to 2 movies per month, Wen goes to 1 movie per month, and Adam goes to 3 movies per month. At a price of $10 per tiet, Shalimar goes to 1 movie, Wen goes to 0 movies, and Adam goes to 2 movies. Graph and carefully label the individual demand curves,
6. At a price of $5 per bag, William is willing to supply 3 bags of oranges, Marguerite 2 bags, and Felipe 5 bags. At a price of $7 per bag, William is willing to supply 5 bags, Marguerite 4 bags, and Felipe 7 bags.Graph and carefully label the individual supply curves, and then graph the market
5. Using your understanding of the nonprice determinants of supply and of demand, analyze ea of the following market cases. Draw a graph showing what happens in ea situation, indicate what happens to equilibrium price and quantity, and explain why, following this example: Market for gasoline:
4. Continuing on from the previous problem (in question 3), suppose that new innovations in energy efficiency reduce people’s need for electricity. e supply side of the market does not ange, but at ea price buyers now demand 3 million kilowa hours fewer than before. For example, at a
3. Suppose that the supply and demand sedules for a local electric utility are as follows: e price is in cents per kilowa hour (kWh), and the quantities are in millions of kilowa hours. e utility does not operate at prices less than 13 cents per kWh.a. Using graph paper and a ruler,
2. Explain in words why the demand curve slopes downward.
1. Explain in words why the supply curve slopes upward.
12. Explain the difference between precision and accuracy.
11. Name three ways in whi supply can be inadequate.
10. Explain the difference between market value and social value.
9. Illustrate what happens to equilibrium price and quantity when both the supply and demand curve shi. (Explore different combinations of shiing curves.)
8. Illustrate what happens to equilibrium price and quantity when either the supply curve or demand curve shis.
7. Draw a graph illustrating surplus, shortage, and equilibrium.
6. Name the five nonprice determinants of demand.
5. Illustrate on a graph: (a) a decrease in quantity demanded and (b) a decrease in demand.
4. Define and sket a demand curve.
3. Name the six nonprice determinants of supply.
2. Illustrate on a graph: (a) a decrease in quantity supplied and (b) a decrease in supply.
1. Define and sket a supply curve.
2. For ea example below, discuss whether it is a situation of shortage, scarcity, or inadequacy.a. You go to a store to buy a certain computer game and find that it is sold out.b. Jasmine cannot afford to go to a doctor.c. Rafe can think of dozens of songs he would like to download, but he also
1. In Chapter 1 we discussed the three basic economic questions: What should be produced? How should production be conducted? For whom should economic activity be undertaken? Discuss how the workings of markets provide some answers to these questions, also considering the implications for resource
2. Have you ever found yourself shut out of a class that you wanted to take because it was already full?Or has this happened to a friend of yours? Analyze this situation in terms of surplus or shortage. Do you think classes are supplied through “a market” similar to what has been described in
1. ink about the market for high-quality basketballs. In ea of the following cases, determine whicurve will shi and in whi direction. Also draw a graph and describe, in words, the anges in price and quantity. (Treat ea case separately.)a. A rise in consumers’ incomesb. An
2. Verbally explain the difference between a ange in “quantity demanded” and a ange in demand.Considering the demand side of the market for lawn-mowing services, what kind of ange (increase or decrease, in quantity demanded or demand) would ea of the following events cause?a. A new
1. Explain verbally why the demand curve slopes downward.
2. Sket a supply curve graph illustrating a student’s willingness to offer tutoring services. e student, call her Lena, is willing to tutor for three hours per week if she receives $10/hour. If Lena receives $15 per hour, she is willing to tutor for five hours per week. If she can arge
1.1. Verbally explain the difference between a ange in “quantity supplied” and a ange in supply.Considering the supply side of the market for lawn-mowing services, what kind of ange (increase or decrease, in quantity supplied or supply) would ea of the following events cause?a.
3. Imagine trying to run a contemporary market economy without ea of the following. What problems do you think would arise? What might people have to do to get around the la of ea one?a. Moneyb. e expectation that most people will not eatc. An organized way of keeping people from
2. Match each concept in Column A with an example in Column B. Column A a. Explicit contract b. A core sphere activity c. Implicit contract d. A public purpose sphere activity e. A drawback of markets f. A car loan g. A used bike sold on craigslist h. The sale of crude oil to Exxon Mobil
1. Give an example of ea of the following:a. A retail marketb. A commodity marketc. A resale marketd. A financial markete. An underground marketf. An auction market g. A market with bargaining
11. What are three major categories of market outcomes, based on efficiency, fairness, and sustainability?
10. List three major types of markets in terms of how prices are set.
9. List eight different types of markets in terms of what is sold.
8. Give several examples of the infrastructure necessary for markets to function.
7. Give several examples of ways in whi trust can be established.
6. Describe four main categories of institutional requirements for markets.
5. Give three different meanings of the term “market.”
4. What are some major aracteristics of the business sphere?
3. Why do businesses find it difficult to supply “public goods”?
2. What are some major aracteristics of the public purpose sphere?
1. What are some major aracteristics of the core sphere?
2. “Indeed, it has been said that democracy is the worst form of government,” said British Prime Minister Winston Churill (1874–1965), “except all those other forms that have been tried from time to time.”Some people make the same claim about more market-oriented forms of economic
1. On a sheet of paper, draw two columns. In one column, list some historical and contemporary advantages of market exanges, and in the other, list some disadvantages. Can you give examples beyond those listed in the text?
2. e Internet has opened up a whole new set of markets for everything from antiques to airplane tiets. Pool your knowledge with that of others in the class, and, for the types of markets listed in this section, think of as many examples as possible that are online.
1. Reviewing the different types of markets outlined in this section, think about whether you have ever directly participated in a market of ea type. If so, describe specific instances.
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