Instruction – Please answer all the questions with your own words or fill in the blanks. Question 1 What is the importance of studying economics? Give two good examples how the knowledge can help you in your daily routines. Question 2 Do you agree or disagree with each of the following statements? Briefly explain your answers and illustrate each with supply and demand curves. The price of coffee rises, causing the demand for sugar to decrease. Therefore, the two goods are substitutes. A decrease in supply causes the price of coffee to fall.
Instruction – Please answer all the questions with your own words or fill in the blanks.
Question 1
What is the importance of studying economics? Give two good examples how the knowledge can help you in your daily routines.
Question 2
Do you agree or disagree with each of the following statements? Briefly explain your answers and illustrate each with
- The price of coffee rises, causing the demand for sugar to decrease. Therefore, the two goods are substitutes.
- A decrease in supply causes the price of coffee to fall.
- During 2009, incomes fell sharply due to the financial crisis of 2008-2009. This change likely led to a decrease in the prices of both normal and inferior goods.
- If both coffee and tea are normal goods and the price of coffee increases, it will increase the demand for tea.
- If the price of lemonade decreases due to insufficient demand, and its supply decreases at the same time, the
equilibrium price will clearly rise.
Question 3
Refer to the table below to answer the questions. Use the
- If the price of a hamburger increases from $8 to $10, the
price elasticity of demand equals __________. - If the price of a hamburger increases from $6 to $8, the price elasticity of demand equals __________.
- If the price of a hamburger decreases from $6 to $4, the price elasticity of demand equals __________.
Question 4
Instruction: Fill in the blanks with most accurate answer.
4.1. The owner of a local hot dog stand has estimated that if he lowers the price of hot dogs from $2.00 to $1.50, he will increase sales from 400 to 500 hot dogs per day. Using the midpoint formula, the demand for hot dogs is ___________.
- A) elastic.
- B) inelastic.
- C) unit elastic.
- D) perfectly elastic.
4.2. At a price of $20, a store can sell 24 picture frames a day. At a price of $18 the store can sell 33 picture frames a day. Since total revenue ________ by the price decrease, demand must be ________.
- A) is increased; elastic
- B) is increased; inelastic
- C) is increased; unit elastic
- D) is decreased; elastic
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