Economics Name: Date: College:
Unit 1 Review Packet
1. Describe the economic concept of scarcity (1-2 sentences). Be sure to include wants and resources in your definition.
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2. For each resource in the chart below, a) explain what it is and b) give one example
Land
Labor
Capital
Entrepreneurship
3. Explain the concept of an opportunity cost – in your own words, what is it?
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4. Imagine that you want to make some extra money after school and decide to start working at a fast-food restaurant on the weekdays. What would be the opportunity cost of your decision? (1-2 sentences)
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5. In your own words, what is the purpose of a Production Possibilities Frontier (PPF)?
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Use the Graph Below to Answer Questions #6-9
Vandalay Company’s PPF
6. At Point R, How many hats and how many glasses are being produced? [______hats, ______glasses]
7. At Point V, How many hats and how many glasses are being produced? [______hats, ______glasses]
8. Explain in 2-3 sentences what is happening at point S and point W. (Hint: think about these words: possible, efficient)
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9. If the Vandalay Company is currently producing at point R and decides to move production to point V, what would be the opportunity cost of their decision?
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10. Draw a correctly labeled Production Possibilities Frontier (PPF) using the data from the chart.
Circuit CityCD’s / DVD’s
12 / 0
9 / 4
6 / 9
3 / 13
0 / 16
[Economics Review Packet] Name: Date: College:
Part I: Basics
1. Explain the concept of demand. What happens to quantity demanded as the price of the product goes up? What about when the price of that product goes down? (2-3 sentences)
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2. Explain the concept of supply. What happens to quantity supplied as the price of the product goes up? What about when the price of that product goes down? (2-3 sentences)
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3. In the space below, draw a supply and demand graph for Nike Basketball Shoes if the equilibrium price is $100 and the equilibrium quantity is 300. Be sure to include labels for the title, price, quantity, supply, demand, and equilibrium.
4. In the space below, draw a supply and demand graph for Twix Candy bars if the equilibrium price is $1.50 and equilibrium quantity is 100. Be sure to include labels for the title, price, quantity, supply, demand, and equilibrium.
Part II: Shifts in the Demand Curve
Directions: Read each of the following products and situations. Then in the blank, write whether the situation would shift the demand curve to the LEFT or to the RIGHT.
5. Product: Video Games. Situation: Playing Video Games can lead to eye problems later in life.
Does the demand curve shift Left or Right? ______
6. Product: Cars. Situation: FedEx closes and many people in Memphis lose their jobs
Does the demand curve shift Left or Right? ______
7. Product: DVD’s. Situation: DVD players are now on a big sale
Does the demand curve shift Left or Right? ______
8. Product: Furniture. Situation: Many people start moving to Memphis to live and work
Does the demand curve shift Left or Right? ______
9. Product: iPhone. Situation: Buyers expect that iPhones will go on sale in about a month
Does the demand curve shift Left or Right? ______
10. In the space below draw a S/D graph for Bananas. Then imagine that news comes out saying that eating a banana every day will help you live longer. Draw the shift in demand for bananas. Be sure to label all parts of the graph!
11. What happened to the equilibrium price for bananas? Is it higher or lower?
12. In the space below draw a S/D graph for Coca-Cola. Then imagine that Pepsi has a big sale on their soda. Draw the shift in demand for Coca-Cola. Be sure to label all parts of the graph!
13. What happened to the equilibrium price for Coca-Cola? Is it higher or lower?
Part III: Shifts in the Supply Curve
Directions: Read each of the following products and situations. Then in the blank, write whether the situation would shift the supply curve to the LEFT or to the RIGHT.
14. Product: T-shirts. Situation: The cotton used to make t-shirts gets more expensive
Does the supply curve shift Left or Right? ______
15. Product: Twix Candy Bars. Situation: A new machine can make Twix faster than before
Does the supply curve shift Left or Right? ______
16. Product: BBQ Wings. Situation: Three BBQ restaurants in Memphis close down
Does the supply curve shift Left or Right? ______
17. Product: Swimsuits. Situation: Companies expect that the price of swimsuits will go down soon.
Does the supply curve shift Left or Right? ______
18. Product: Hot Peppers. Situation: Extremely warm weather helps the growth of hot peppers.
Does the supply curve shift Left or Right? ______
19. In the space below draw a S/D graph for Houses in the space below. Now let’s say that bricks used to build houses are cheaper than before. Draw the shift in the supply of houses. Be sure to label all parts!
20. What happened to the equilibrium price for houses? Is it higher or lower?
21. In the space below draw a S/D graph for Apples in the space below. Now let’s say that terribly cold weather hurts the growth of apples this year. Draw the shift in the supply of apples. Be sure to label all parts!
22. What happened to the equilibrium price for houses? Is it higher or lower?
Part IV: Price
23. Draw a S/D graph for Diabetes Medicine with an Eq Price of $50 and Eq Quantity of 300. The government feels that this is too much, and tells stores they cannot sell Diabetes medicine for more than $25. Draw the price control on the graph, and make sure to label all parts.
24. Draw a S/D graph for Rice with an Eq Price of $20 and Eq Quantity of 500. The government feels that this is not enough for farmers, and tells stores they cannot sell Rice for less than $35. Draw the price control on the graph, and make sure to label all parts.
Part V: Supply and Demand in the Real World
25. Explain in terms of Supply and Demand why sometimes it can take 15 minutes to drive somewhere in Memphis, and sometimes it takes 30 minutes to drive the same route. What is one potential solution to this problem?
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26. Explain in terms of Supply and Demand why a College graduate has a higher salary than a high school graduate. ______