summer%20ps1

# summer%20ps1 - 1 The answer to the question “why...

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1. The answer to the question “why economics?” was related to studying ways to allocate resources. Give five examples of ways we allocate things. (These are called allocation mechanisms .) 2. What are the four factors of production and the corresponding method of payment? 3. What is the definition of a capital good? 4. If we were to graph all possible combinations of any two goods we can produce in the U.S., what would this graph look like? (Draw it, don’t describe it) 5. What determines demand? That is, what determines the position and the slope of a demand curve? 6. The surgeon general decides one day that school causes cancer. Illustrate the effect of this announcement on the market for education. 7. Draw a PPF if there is no law of increasing cost. Consider the following demand functions, where Q stands for quantity and P indicates price: Demand for shoes: Qs = 50 – 2Ps Demand for penicillin: Qp = 20 – 0.4Pp 8. Draw these demand curves, please. 9. Calculate the following price elasticities for both shoes and penicillin:
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