Description
please answer the question from the file with the clear details . by the way, please check the answer about the multiple -choice. thank you.
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Find the attached doc,Best Regards
ECONOMICS 1
Students Name
Professor’s Name
Course
Date
1 Show a consumer’s budget line for ham and cheese if the price of ham is $8, price of
cheese is $5, and he has $200 of income. Remember to label your axes. Write down exact
values for the endpoints and slope of the budget line.
Let ham be – H
Let cheese be – C
8h + 5c = 200
C
H
0
25
8
20
16
15
24
10
32
5
40
0
1
ECONOMICS 2
30
25
20
H
a 15
m
10
5
0
0
10
20
30
40
50
cheese
The slope = (y2 –y1)/ (x2 – x1)
= (20 – 10)/(8 – 24)
= 10/- 16
= - 0.625
2 Answer the following True/False questions that refer to the same situation as Problem #1
by circling the correct answer.
TRUE
FALSE
The consumer could afford to buy
25 units of cheese and no ham.
TRUE
FALSE
The consumer could afford to buy
25 units of ham and no cheese.
2
ECONOMICS 3
TRUE
FALSE
The consumer could afford to buy
20 units of ham and 20 units of cheese.
TRUE
FALSE
If the consumer bought 10 units of
ham and 10 units of cheese, he would be correctly solving his consumer
problem.
TRUE
FALSE
If the price of ham increased, the
maximum amount of cheese the consumer could afford would decrease.
TRUE
FALSE
If the price of ham increased and
the consumer continued to buy at least 1 unit of ham, the amount of cheese
the consumer could afford would decrease.
3 For a given good at a given price, if the amount of that good that producers supply
EXCEEDS the amount that consumers demand, what will happen to the price of that
good? Circle the correct answer below.
PRICE WILL GO UP PRICE WILL NOT CHANGE
PRICE WILL GO DOWN
3
ECONOMICS 4
4 Fill in the blanks below.
a.
If the cross price elasticity of demand between two goods is positive,
those goods are called ____________substitute______ goods.
b.
If the cross price elasticity of demand between two goods is negative,
those goods are called ________complementary___________ goods.
c.
If the income elasticity of demand for a good is positive, that good is
called a ________normal____ good.
d.
If the income elasticity of demand for a good is negative, that good is
called a _______inferior___________ good.
e.
The same price elasticity of demand for a good is always
____negative____ since demand curves slope downward.
5 If a demand curve is perfectly elastic and consumers buy 200 units of the good at a
price of $6, how many units will be purchased if the price increases to $7.50?
When the demand curve is perfectly elastic and the price increase the quantity demanded
drops to zero. This is because consumption of the product only takes place at that set price and
any other price cannot sustain the quantity demanded. This is usually the case in a perfectly
competitive market structure where the firm is a price taker and an increase in the price leads to
zero sales.
6 If a demand curve is perfectly inelastic and consumers buy 200 units of the good at a
price of $6, how many units will be purchased if the price increases to $7.50?
4
ECONOMICS 5
An increase in price will not result in an increase in the quantity consumed. In this case the
quantity will remain 200 conversely the firm will be able to accrue more profit as the revenue
earned will increase. This is possible in market structures that have only one firm as the producer
and has numerous consumers. The producer in this case is a monopoly and is a price giver.
7 Explain why allowing the producer to choose his inputs (amount of labor, capital,
land, etc) allows him to affect the shape/size of the PPF, which we previously had assumed
was immutable production limitation.
The gradient of the PPF dictates that in order to produce more of one good, the production of
another good has to be foregone. The shape and size of a PPF is determined by the amount of
resources that are available and how they can be interchanged to affect production while the
economy is still at the efficient point of production. Conversely, if the producer is allowed to
choose his inputs based on their costs, availability and ease to use in production the shape and
size of the PPF would change drastically as demonstrat...