Graphical presentation: focusing on the point where function 1 equals function 2 (Y1=Y2)
Using the formula we get the following results:
Price elasticity of demand (business travelers) = 0.231
Price elasticity of demand (vaca
P S 2 Compilation of Short Answers
1. Obvious from the graph.
The flaw in this analysis lies in the statement: The lower price, however, will then increase the
demand. This is false. As we can see in Figure 1, the demand for bread will decrease, shifti
I would need to know how much of the quantity of bagels is demanded and who would produce
them. Similarly, I would need to decide on how the bagels would be produced.
The information I would need is what available resources are first of all. In order t
A = 40 mowed loans
B = 40 washed cars
C = 20 mowed loans + 20 washed cars
D = 25 mowed loans + 25 washed cars
The PPF is a curve with changing slope. The slope represent the
opportunity cost. The slope/opportunity cost changes since not every wor
The production possibilities frontier (PPF) is a graph that shows the various combinations
of output that the economy can possibly produce given the available factors of production.
Because resources are scarce, not every conceivable outcome is feasibl
Rich can afford the best healthcare while poor cannot. It is an
attempt to make the society distribute the healthcare more equally. However, it
might not be efficient at the same time, as now the country does not use its scarce
resources to achieve
Problem Set 1 Short Answers
1. Positive statements are descriptive, that is, they explain how the world is. Normative
statements explain how the world ought to be. A key difference between positive and
normative statement is how we judge their validity. P
Study Finds Enrollment Is Up At Colleges Because Of Recession
High opportunity costs are often the biggest factor in the decision to attend school.
Instead of attending school, many people choose to work. However, during the recession
the economy shrinks,
1. Childs reasoning is wise! Using the cost-benefit analysis he makes an estimate of the
total costs and benefits of the game as a whole. The benefit of winning the game is
perhaps pride or slight self confidence, but the cost is getting hurt (even paraly
1. Page 19, questions 11 and 12
Activity is motivated by a concern that everyone pays determined
amount of money for the cable TV, therefore it is a concern about equity.
Activity is motivated by a concern that even the poor can afford to
Grain (in tons)
Opportunity cost of :
2.5 tons of grain
1.25 tons of grain
1 ton of grain
Neither country has an absol
- The reasoning behind is the concept of comparative advantage,
specialization and gains from trade.
- Comparative advantage is the ability to produce a good at a lower
opportunity cost than another producer. Therefore talented people (a phys
a. This fact suggests that the value of the price elasticity of supply lies between 0 and 1 that is, the
supply curve is price inelastic.
b. My answer is that the firms would benefit.
If the gas holiday becomes active, the consumers would have an incen
Quotes from Economics Naturalist
Nuts and alcoholic beverages are complements. Someone who eats more nuts will demand more
beer or mixed drinks. Since nuts are relatively cheap and each alcoholic drink generates a
relatively high profit margin, making nut
a. There will be surplus. The situation is represented and graphed in Figure 1.
b. It is certainly possible if the demand curve is relatively elastic. The percentage change in price
will cause a relatively bigger percentage change in quantity demanded.
Let us assume that the demand for the museum is elastic. This is quite logical as there are many
substitutes for a museum if an admission ticket is high. In order to increase the funds of the museum that
is, the total revenue, it is needed to lower the
a. The equilibrium price is 6 dollars and the quantity is 81.
b. The market would experience surplus of goods (excess supply) so the decrease in price
(market signal) would drive the market toward the equilibrium.
c. The market would experience shortag
In this essay I will use the knowledge and rules of economics to explain the concept of
prostitution. Recently I read an article in The Economist which had talked about prostitution in
Africa and why prostitution is more common in poor countries. One obvi