ECO 212 Week Two

# ECO 212 Week Two

398.7k points
1. Individual Assignment: Supply, Demand and Price Elasticity Quiz

• Resources: Principles of Economics textbook and Tomlinson Economics Videos

Prepare to take the Supply, Demand and Price Elasticity Quiz.

Week Two Quiz

Supply & DEMAND and Price Elasticity

Section One: Multiple Choice

1. If a 20% decrease in the price of long distance phone calls leads to a 35% increase in the quantity of calls demanded, we can conclude that the demand for phone calls is:

a. elastic.

b. inelastic.

c. unit elastic.

d. stretchy elastic.

2. Which of the following pairs are examples of substitutes?

1. Popcorn & Pepsi
2. Automobiles & Bicycles
3. Boats & Fishing Tackle
4. Wine & Cheese

3. When we say that a price in a competitive market is too high to clear the market we usually mean that (given upward-sloping supply curves).

1. no producer can cover the costs of production at that price
2. quantity supplied exceeds quantity demanded at that price
3. producers are leaving the industry
4. consumers are willing to buy all the units produced at that price

4. Which of the following statements is incorrect?  Assume upward-sloping supply curves.

1. If the supply curve shifts left and the demand remains constant, equilibrium price will rise.
2. If the demand curve shifts left and the supply increase, equilibrium price will rise.
3. If the supply curve shifts right and the demand curve shifts left, equilibrium price will fall.
4. If the demand curve shifts right and the supply curve shifts left, price will rise.

_ _

Section Two: Short Answer (250 words or less)

1.  Define Elasticity of Demand.  Give an example.

1. Define the Law of diminishing Marginal utility.  Give an example.

1. Describe what likely happens to market price and quantity for the particular goods in each of the following examples.  Will market price increase, decrease, stay the same or is it in-determinant?  Will market quantity increase, decrease, stay the same or is it in-determinant?

a)     A technological breakthrough lowers the cost of producing tractors in India while there is an increase in incomes of all citizens in India.  Market: tractors.

b)   The United States imposes a ban on the sale of oil by companies that do business with Libya and Iran.  At the same time, very surprisingly. A large reserve of drillable oil is discovered in Barrington, Rhode Island.  Market:  oil.

c)     In the summer of 1996, many people watched the Atlanta Summer Olympics on NBC instead of going to the movies.  At the same time, thinking that summer time is the peak season for movies, Hollywood released a record number of movies.  Market:  movie tickets.

d)    After a promotional visit by Michael Jordan to France, a craze for Nike Air shoes develops, while workers in Nikes manufacturing plants in China go on strike decreasing the production of these shoes.  Market: Nike shoes.

1. Determine if the demand for the following products is price elastic or price inelastic, and explain your answer.
2. Newspapers
3. Fresh peas
4. Gasoline sold at a local gasoline station
5. Major League Baseball tickets
6. Hotel rooms for people planning a vacation
7. Beer
8. Residential land
9. Medical care
10. Beef
11. Electricity (households)

1. Name three types of market systems and give an example of each.

2. Define the Law of Demand and the Law of Supply.  Give an example for each.

Examples for this will vary.

ECO 212

393k points

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Excerpt from file: Economics Tutorial Week Two Quiz (ANSWER SHEET) SUPPLY & DEMAND AND PRICE ELASTICITY Section One: Multiple Choice 1. If a 20% decrease in the price of long distance phone calls leads to a 35% increase in the quantity of calls demanded, we can conclude that the demand for phone calls is: a. elastic.

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