Economics

Mr. HaubnerName:______

WP: Unit I

Word Problems: Chapter 1 & 2

  1. Production Possibilities models and opportunity cost are foundations of economic thought.
  2. Draw and label a production possibilities model and label it with three points as A: underutilization, B: efficiency and C: unachievable.
  3. Demonstrate and explain the three reasons for a shift in the PPF.
  4. Lastly, explain and demonstrate the law of increasing costs on a production possibilities model and how that compares to a model with a constant slope.
  5. Use the following information to answer the given questions based on the concept of opportunity cost.

Units of Food Produced

FoodClothing

Haubnerland824

Smithland510

  1. Which country has a comparative advantage in the production of food?
  2. Which country has a comparative advantage in the production of clothing?
  3. Which country has a absolute advantage in the production in food and/or clothing?
  4. Which country should produce food and trade for clothing and which country should produce clothingand trade for food?
  1. Use the following information to answer the following questions about comparative advantage and opportunity cost.

Hours required to produce a single unit

Food Clothing

Spockland48

Kirkland39

i.Which country has a comparative advantage in the production of food?

ii.Which country has a comparative advantage in the production of clothing?

iii.Which country has an absolute advantage in the production in food and/or clothing?

iv.Which country should produce food and trade for clothing and which country should produce clothing and trade for food?

  1. The circular flow model is a simple economic model which explains how our economy works.

Draw and label a circular flow model for our economy labeling all 16 points.

  1. Explain all 16 points of the model in detail.
  2. List two-three assumptions and flaws of the model.

Word Problems: Chapter 4

  1. The law of demand states that as the price of an item increases, the quantity demanded at that price decreases and vice versa.
  2. First, draw and label a demand curve and explain the inverse relationship that exists between price and quantity by using and increasing and decreasing price examples.
  3. Second demonstrate and explain the difference between the market demand curve and the individual demand curve.
  4. Third, list the five reasons for a shift in demand, and demonstrate the effects on price and quantity. Be sure to include a supply curve as well.
  5. Explain and demonstrate the difference between a change in the quantity demanded in part I and a change or shift in demand in part III.
  6. Assume there is a perfectly competitive market for beef-steak; a normal good. Also, assume that each of these scenarios is independent of the others. Also, explain the effects on price, quantity and unemployment within the industry for all three examples.
  7. Demonstrate and explain the effects of an increase in the incomes of consumers on the market demand for beef-steak.
  8. Demonstrate and explain the effects on price, quantity, and unemployment in the beef-steak industry with a release by the AMA stating that extensive consumption of beef-steak leads to several types of cancer.
  9. Demonstrate and explain the effects on the market for beef-steak in terms of price, quantity and unemployment if there were to be a significant decrease in the price of the pork market.
  10. Suppose there were to be a decrease in the price of the “salsa flavored” dog food market from $5.75 to $4.50 per bag, which resulted in the quantity demanded increasing from 1100 bags per month to 1600 bags per month.
  11. Is this an example of an elastic or inelastic good?
  12. Did this increase the total revenue of the firms?
  13. Assume the market for cigaretteswere to experience a significant increase in prices from $4 per pack to $6 per pack, and as a result there was a decrease in the number of packs sold from 12,000 packs to 10,000 packs per month.
  14. Is this an example of an elastic or inelastic good?
  15. Did this increase the total revenue of the firms?

Word Problems: Chapter 5

  1. The law of supply states that as the price of an item increases, the quantity supplied at that price increases and vice versa.
  2. First, draw and label a supply curve and explain the relationship that exists between price and quantity with increasing and decreasing price examples.
  3. Second, demonstrate and explain the difference between the market supply curve and the individual supply curve.
  4. Third, list the five reasons for a shift in supply and demonstrate its effects on price and quantity.
  5. Explain the difference between a change or shift in supply and a change in the quantity supplied.
  6. Assume there is a perfectly competitive market for tablets. Use each of the following inputs to explain the effects on the market supply curve, price and quantity for tablets
  7. If there were to be an increase in regulations of the government on producers of tablets, what would happen to the market supply curve, price and quantity for tablets.
  8. If there were to be an increase in the number of producers, how the market supply curve, price and quantity change for tablets.
  9. If there were to be a negative change in technology, how would the market supply curve, price and quantity change in the market for tablets.

Word bProblems: Chapter 6

11. Disequilibrium is described in two different scenarios; surplus (excess supply) and shortage (excess demand).

  1. Demonstrate and explain a market with a shortage using terms such as Qs and Qd.
  2. Now assume there is a rightward shift in Demand in a particular market, explain how the shortage in this market will be overcome.
  3. Demonstrate and explain a market with surplus using terms such as Qs and Qd.
  4. Now assume there is a rightward shift in Supply in a particular market, explain how the surplus in this market will be overcome.

12.Rent control, as a political and economic issue is extremely debatable.

i.What are some of the reasons supporting the use of rent control on the housing market?

ii.Using S & D analysis, does rent control serve as a price ceiling or as a price floor and what is its purpose?

iii.Third, what are some real world implications/costs of rent-controlled housing?

ivHow is the amount of the surplus or shortage derived?

13.The minimum wage is another political and economic issue that carries secondary effects.

  1. What are some reasons supporting the issue of maintaining and raising the minimum wage?
  2. Using S & D analysis, does the minimum wage serve as a price ceiling or as a price floor, and what is its purpose?
  3. What are some drawbacks of the increase in the minimum wage?

14.Assume that you are analyzing the market demand for housing in the east bay area.

i.First, explain three reasons for shift in demand with respect to housing

ii. Using S & D analysis, demonstrate the effects on the housing market of the Bay Area. Be sure to touch on price and quantity issues as a result of the change.

iii. Lastly, identify a possible substitute to the Bay Area housing market and explain the effects of the higher Bay Area housing price on its market.

14. In 1973 and 1979, OPEC decided to cutback production oil.

i. Using S & D analysis, demonstrate the effects of this change on the market for oil. Also, be sure to explain how this affected the price level and output as a result of the change.

ii. Demonstrate and explain how this affected a complimentary product of oil and gas. Be sure to explain and demonstrate the effects of this using S & D analysis with references to price and quantity.