Econ Problem Set & Quiz Questions (Week 1-5)

the price of a coffee cup decreased and quantity sold increased...what happened

price of input (sugar) went down

The rate at which a consumer is ABLE to substitute one good for another is determined by the

price ratio of the goods

Final bundle to the left compensated bundle

Inferior

The elasticity of demand for eggs has been estimated to be -0.1. If egg producers raise their prices by 10 percent, what will happen to their total revenue?

It will increase (.1 is inelastic, price increase causes pretty small decrease in Qd so TR still increases)

Movie tickets - $9, Utility increases 24 Basketball tickets - $20, U increases 45 More movies or basketball tickets

More movies 24/9 is greater than 45/20

Reasonable or Not: Income Elasticity of All Types of Milk is -1.5 Cross-price elasticity between hamburgers and cheese is 1.5

Neither are reasonable...milk is not an inferior good and hamburgers and cheese are complements so their cross price elasticity should be negai

Decrease in price of gold, but demand increased and total sales were increased by 8% (what happened)

Quantity demanded was large enough to offset decrease in price to result in 8% increase in TR, gold is elastic (luxury)

Taylor Swift v Katy Perry

(curve is steep on side of taylor swift (y), she is willing to give up more Taylor for Katy Perry) / MUy is high

Diamond question on the 1st PSET

(knowing the difference between quantity supplied and supply) there is a purposeful decrease in the available supply of diamonds, quantity supplied lowered and price raised (rare) / also increases people's expectations, lets them pay more even tho there is a small # of diamonds out there

True or False: (I) You know cross-price elasticity of PB&J is -2.0 Jelly prices are expected to rise by 10% next year. You should stock 10% more peanut butter. 2)The supply of apartments is more inelastic in the short run than in the long run.

1) is false and 2) is true

True or False: 1) The government expenditures used to pay for subsidies exceeds change in surplus 2) To model effect of a subsidy, we can shift demand curve upward by $s

Both true

Find CE graphically & algebraically

Draw straight line up for expected income and see where it hits the weighted average line(s), take that all the way to utility curve, and come down for the CE CE=E(u)=utility curve

Making demand curve by indifference curves/BCs

Dotted line - quantity (x) Sold line - BC Find price of MS (y) Max quantity/BC=Income/Pms

Interest Rate, Utility, and Consumption Questions

Find 2 equations: MRS=Slope of Budget Constraint (1+r) Intertemporal Budget Constraint Substitute

Use the life-cycle model to depict an individual who saves more in response to a decrease in the interest rate

Saving and borrowing solely looks at what's going on in that first period Cap on interest is a decrease, flatter BC U curves go SW, C1 decreases (save more)

Suppose that 4 units of X and 8 units of Y give a consumer the same satisfaction as 6 units of X and 4 units of Y. Then...

The MRS of X for Y is 2 and the consumer can exchange 2 units of Y for 1 unit of X (cross multiply to see or look at problem)

drought shrinks apple crop...what is the effect on demand

change in quantity demanded (less supply, higher price, change in own price, change in QD)

government control mechanism succeeds in affecting price and results in a...

decrease in the volume of sales (deadweight loss) whether price is forced up or down

binding price ceiling, change in consumer surplus represents what

loss of surplus for those who previously purchased the good at the higher price & gain in surplus for those who get it at the lower price

As Oliver drinks additional cups of tea at breakfast, Oliver's

marginal utility from tea decreases, total utility from tea increases

thousands of new apple pickers...what is the effect on demand

more supply, lower price, change in own price, change in QD

U(P, H) =P+ 4H The price of pizza is $3 and the price of hamburgers is $3 and Paul's income is $300. Paul's grandmother gives him $40 redeemable at PizzaHut. She could have spent less. How much could she have given him?U

you can by 13 pizzas w gift certficate / U=13 4H=13 (H=13/4) 13/4 times 3 = 9.75 which is $10 cash