Principles of Microeconomics
By referencing events in the news or something from your personal experiences, describe one example of each of the five foundations of economics. The five foundations are, opportunity cost, incentives, principle that trade creates value, marginal thinking, and trade-offs. Pg. 100-101
2) For each of the following scenarios, determine if there is an increase, a decrease, or neither and increase nor a decrease in demand for the good in italics.
a. The price of oranges increases.
b. The cost of producing tires increases. c. Samantha Brown, who is crazy about air travel, gets fired from her job.
d. A local community has an unusually wet spring and a subsequent problem with mosquitoes, which can be deterred with citronella?
e. Many motorcycle enthusiasts enjoy riding without helmets (in states where this is permitted by law).
The price of new motorcycles rises.
3) for each of the following scenarios, determine if there is an increase, a decrease, or neither and increase nor a decrease in supply for the good in italics.
a. The price of silver increases.
b. Growers of tomatoes experience an unusually good growing season.
c. New medical evidence reports that consumption of organic products reduces the incidence of cancer. d. The wages of low-skill workers, a resource used to help produce clothing, increase. e. The price of movie tickets, a substitute for video rentals, goes up. 5) The market for ice cream has the following deman and supply schedules: Price Quantity Demand Quantity Supplied (per quar) (quarts) (quarts) $2 100 30 $3 80 45 $4 60 60 $5 40 75 $6 20 90 a. What are the equilibrium price and equilibrium quantity in the ice cream market? Confirm your answer by graphing the demand and supply curves. b. If the actual price was $3 per quart, what would drive the market toward equilibrium?
8) Demand and supply curves can also be represented with equations. Suppose that the quantity demanded, QD, is represented by the following equation:
Qd= 90-2p The quantity supplied, Qs= P A. Find the equilibrium price and quantity. Hint: Set Qd = Qs and solve for the price, P, and then plug your result back into either of the original equations to find Q.
b. Suppose that the price is $20. Determine Qd and Qs. c. At a price of $20, is there a surplus of a shortage in the market?
d. Given your answer in part c, will the price rise or fall in order to find the equilibrium point? Pg. 143-144 2) College logo T-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10, it finds that it call sell 50 T-shirts per week. What is the price elasticity of demand for the logo T-shirts? 4) If a 20% increase in price causes a 10% drop in the quantity demanded, is the price elasticity of demand for this good elastic, unitary, or inelastic? 8) Do customers who visit convenience stores at 3 a.m. have a price elasticity of demand that is more or less elastic than those who visit at 3 p.m.? 10) The cross-price elasticity of demand between American eagle and Hollister is 2.0. What does that tell us about the relationship between these two stores?
11) A local golf course is considering lowering its fees in order to increase the revenue coming in. Under what conditions is the fee reduction going to achieve its goal?