Econ 202 1st Edition Exam 2 Study Guide Lectures 8 14 Lecture 8 February 17 Terms to remember Market Demand Curve Economic Profits Revenue Economic cost Law of Supply What causes market demand curve to shift What affects firm supply And how do those factors affect firm When graphing a supply model what assumption is made Try the following question 1 The market supply curve for flour burrito shells will shift down right when A the price of a complement increases B the price of a complement decreases C a new type of burrito making machine produces more burritos per hour D the price of flour increases Lecture 9 February 19 Terms to remember Market Supply Curve Shortage Surplus Comparative Status Equilibrium How do you find the market supply curve Prices Peter s Eric s Lyla s Market s Quantity Quantity Quantity Quantity 15 1500 800 1000 12 5 1200 600 800 10 900 400 600 7 5 600 200 400 5 300 0 250 2 5 0 0 0 Fill in the following table What factors affect the supply curve When does a surplus and a shortage occur With shortage what should you expect to happen to prices What would happen to price when you have a surplus What is the 3 step process and what is it used for Try the following questions 2 Suppose that great weather during a summer resulted in a bumper crop a lot more than is normal of potatoes What will happen to the equilibrium price and quantity of potato chips A Price will increase and quantity will increase B Price will decrease and quantity will increase C Price will increase and quantity will decrease D Price will decrease and quantity will decrease Lecture 10 February 19 Important info Elasticity Point price elasticity of demand equation Q2 Q1 Q1 P2 P1 P1 Try the following problems 3 The price elasticity of demand at price 2 and quantity 16 equals A 16 B 1 4 C 1 9 D 1 16 4 The price elasticity of demand at the midpoint of the demand curve equals A 0 B C 1 D infinity 5 The price elasticity of demand for a good measures how responsive A buyers are to a change in income B buyers are to a change in the price of the good C buyers are to a change in the price of a complement D buyers are to a change in the price of a substitute Lecture 11 February 26 Elasticity in terms of shape describe when and why would a graph or a function be elastic or inelastic Give an example of each of the following A perfectly elastic curve A perfectly inelastic curve An elastic curve An inelastic curve What does the area under the curve represent 6 Which of the following price quantity combinations is in the inelastic portion of the demand curve A 0 40 B 20 20 C 30 10 D 40 0 Lecture 12 13 March 3 5 Practice problems similar to the following 7 Victor and Louisa are energy economists Both of them recently calculated the price elasticity of demand for gasoline in Colorado Victor calculated an elasticity equal to 1 5 while Louisa calculated an elasticity equal to 0 2 Which of the following reasons would explain their very different calculations A Victor calculated an elasticity for a one month period and Louisa calculated an elasticity for a two year period B Louisa calculated an elasticity for a one month period and Victor calculated an elasticity for a two year period C Louisa calculated an elasticity for Citgo gasoline while Victor calculated an elasticity for all brands of gasoline D Victor s calculation was further down right the market demand curve 8 The price elasticity of demand at Price 30 and Quantity 10 is A 10 B 30 C 1 3 D 3 9 The price elasticity of demand at Price 40 and Quantity 0 A is infinite B equals zero C equals one D equals 40 10 The price 20 and quantity 20 point on the market demand curve in Figure 1 is in the portion of the market demand curve A perfectly elastic B unit elastic C elastic D inelastic Lecture 14 March 10 Terms to remember Price Ceiling Price floors Price controls Try the following problems 11 The minimum wage is A a price floor B a price ceiling C the market equilibrium price for labor D the lowest wage at which laborers are willing to work 12 A price ceiling A will only be binding if it is set equal to the equilibrium price B will only be binding if it is set above the equilibrium price C will only be binding if it is set below the equilibrium price D is never binding in a market economy 13 When the market demand curve is vertical A price ceilings are never binding B price floors are never binding C price ceilings may be binding but price floors cannot be binding D price controls may or may not be binding 14 A non binding price floor A creates a shortage B creates a surplus C can create either a shortage or a surplus D has no effect on the market equilibrium 15 Price controls are viewed by economists as A essential for the functioning of markets B an alternative to markets C problematic because they might interfere with the functioning of markets D problematic because they are better implemented by markets instead of governments Answers 1 C 2 B 3 B 4 C 5 B 6 A 7 B 8 A 9 D 10 B 11 A 12 C 13 D 14 D 15 C