ASSIGNMENT 2
Chapter 10
Question 2
The theory of liquidity preference explains how the supply and demand for real money balance
determined the interest rate. The theory states that there is a fixed supply of money which the
central bank of a county choose
1
Chapter 13
Questions for Review:
1. There are two models, the stickyprice model and the imperfect information
model. The first model is the stickyprice model. The market imperfect in this
model is that prices in the goods market dont adjust immediatel
1
Chapter 10
Question for review:
1.The Keynesian cross tells us that fiscal policy has a multiplied effect on income.
The reasoning behind this is the consumption function, which tells us that higher
income causes higher consumption. An increase in the g
1. Vertical Supply Curve
Inelastic supply, or vertical supply curve is when a higher price doesnt
result in more production. When there is a nearly vertical supply curve,
even a small increase in demand results in a sharp upward price spike,
and even a sm
1.2
a) y=0.5x
A(0,0)
B(4,2)
Yes this is a linear function, there is a proportional relationship between x and y. If a
constant were added the line would shift in a parallel way either up or down according to
what constant was added.
b) y=0.5x + 6
A(0,6)
B
page:
1
Assignment 1
Chapter 3:
1. When the price lies below its equilibrium value, there is an excess demand, or
shortage. The supply and demand model predicts that because there is excess
demand, dissatisfied buyers are motivated to offer higher prices,
Microeconomics Outline: Exam I, Chapter 25
2. Supply and Demand
Demand: Curve, Function, Schedule
Law of Demand
Adding Demand Curves
Supply, Law of Supply, Adding Supply Curves Market Equilibrium
Shifts in Supply, Shifts in Demand
Joint Shifts in S
1
Chapter 1
Questions for Review:
2. Economist use models to understand the world. They build models or their toy
economies to help explain economic variables, such as GDP, inflation and
unemployment. Economic models illustrate, often in mathematical term
1.
a) Qd= 15 A (0,15)
B( 10, 13)
1
P
5
Qs= 1 +
A (0, 1)
B (10, 5)
3
P
5
b) Slope of D curve =
Slope of S curve =
y 2 y 1
x 2x 1
y 2 y 1
x 2x 1
=
=
1315
100
5(1)
100
=+
1
5
3
5
The slope is the change of y over x in an equation. The slope indicates which
Chapter 11
Decision Time Frames
What do General Motors, PennPower, and Campus Sweaters, have in common?
Like every firm,
They must decide how much to produce
How many people to employ
The firm makes many decisions to achieve its main objective: profit max
Micro Chapter 12
A corn farmer must make many decisions, but figuring out the price to charge for his corn is not
one of them.
Corn farmers and the producers of most cropsamong them wheat, soybean, canolamust
accept the price determined by supply and dema
the price elasticity of demand is calculated by using the formula
Calculating price elasticity of demand
The price elasticity of demand is calculated by using the formula
percentage change in quantity demanded
We express the change in price as a percentag
Consumption possibilities
Household consumption choices are constrained by its income and the prices and services
available
The budget line describes the limits to the household consumption choice
Budget Equation
we can describe the budget line by using a
Consumption Choices
The choices you make as a buyer of goods and services is influenced by many factors, which
economists summarize as:

Consumption possibilities
Preferences
Consumption possibilities
consumption possibilities are all the things that you
Consumption Choices
The choices you make as a buyer of goods and services is influenced by many factors, which
economists summarize as:

Consumption possibilities
Preferences
Consumption possibilities
consumption possibilities are all the things that you