Class 2-20100 - Managerial Economics Class 2 Tuesday Sept 14 1 Admin iClicker Registration and Class Liaison(Wei Yi Shen 2 Using Supply and Demand

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1 THE UNIVERSITY OF BRITISH COLUMBIA 1. Admin: iClicker Registration and Class Liaison (Wei Yi Shen) 2. Using Supply and Demand 3. Government Intervention 4. Introduction to Elasticity 5. Arc Elasticity 6. Point Elasticity 7. Summary and Next Class Managerial Economics Class 2 –Tuesday, Sept. 14 THE UNIVERSITY OF BRITISH COLUMBIA Using Supply and Demand: Clicker Question 1. a) Tomatoes are a substitute for avocados. b) An increase in income would have a similar effect on demand. c) An increase in the price of a complement would have a similar effect on demand. d) All of the above. e) a) and b). The diagram shows the effect of an increase in the price of tomatoes on avocado demand. Which statement is true?
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2 THE UNIVERSITY OF BRITISH COLUMBIA Clicker Question 2: Hurricanes In 2005 Hurricane Katrina destroyed over 1/3 of the natural gas production facilities in the Gulf Coast region of the United States. Hurricane Katrina caused the demand for large cars to decline because the price of natural gas rose, causing the demand for oil to shift out, the price of oil to rise and the price of gasoline to rise. This reasoning depends on the following fact or facts: a. Oil and natural gas are substitutes and gasoline is a complement for large cars. b. Real income fell and declines in income caused the demand for large cars to decline. c. Natural gas can be used as an alternative fuel and is widely used for large cars. d. Oil and gasoline are substitutes and both experienced price increases after the hurricane. e. All of the above. THE UNIVERSITY OF BRITISH COLUMBIA S’ S D P Q Natural Gas : The supply curve for natural gas shifts inward, resulting in a higher equilibrium natural gas price. D’ S D P Q Petroleum : Natural gas and petroleum are substitutes. The price increase in natural gas causes the demand curve for petroleum to shift outward, yielding a higher price for petroleum. Hurricanes and the Supply and Demand for Natural Gas and Petroleum
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3 THE UNIVERSITY OF BRITISH COLUMBIA S’ S D P Q Gasoline: The supply curve for gasoline shifts in as the price of its main input rises, resulting in an increase in the price of gasoline.
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This note was uploaded on 01/19/2011 for the course COMMERCE 290 taught by Professor Brianogram during the Spring '09 term at The University of British Columbia.

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Class 2-20100 - Managerial Economics Class 2 Tuesday Sept 14 1 Admin iClicker Registration and Class Liaison(Wei Yi Shen 2 Using Supply and Demand

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