Define: surplus, shortage, excess supply, excess demand.
What is the economic case for the practice of what many term "price gouging"?
What signals do price changes send to producers and consumers?
What's wrong with this way of thinking? "Economists claim that when the price of something goes up, producers increase the quantity supplied to the market. But last year, the price of oranges was really high and the supply of them was really low. The economists are wrong!"
How will a substantial increase in the demand for housing affect the wages and employment of carpenters, plumbers, and electricians? OR, for that matter, how will a substantial decrease in the demand for housing affect these wages? (Here is an article dealing with this issue from Sunday's Birmingham News.)
What's wrong with this way of thinking? "Economists argue that lower prices will result in fewer units being supplied. However, there are exceptions to this rule. For example, in 1972, a very simple ten-digit electronic calculator sold for $120. By 2000, the price of the same type of calculator had declined to less than $5. Yet business firms produced and sold many such calculators in 2000 than they did in 1972. Lower prices did not result in less production or in a decline in the number of calculators supplied."
This weekend, Alabama plays the University of Arkansas (the"Razorbacks") in beautiful Fayetteville, Arkansas. Assume that at one hour before the game, it appears that many people want to go to the game but cannot find tickets for sale at the their face value. Verbally and graphically describe this market. Can you graph it? What role are scalpers playing?
Today's Birmingham News reports that there are fewer shortages in gasoline in Alabama, relative to other states, in the aftermath of Hurricane Ike. What does this tell us about relative price flexibility in Alabama compared to those other states? Explain graphically.
Which of the following is a positive economic statement?
a. An increase in the minimum wage will reduce employment.
b. The minimum wage should be increased to reduce poverty.
c. Social conscience demands that we increase the minimum wage.
d. Thoughtful people oppose an increase in the minimum wage.
Which of the following do you think would lead to an increase in the current demand for beef?
a. higher pork prices
b. higher consumer income
c. higher prices of feed grains used to feed cattle
d. widespread outbreak of mad cow or foot-and-mouth disease
e. an increase in the price of beef
Try this exercise (for fun).
Previous test question:
What socially beneficial results occur when relative prices rise? I.e., what is their effect on consumers and producers? How is this related to Smith's "invisible hand"?
What is the economic case for the practice of what many term "price gouging"?
What signals do price changes send to producers and consumers?
What's wrong with this way of thinking? "Economists claim that when the price of something goes up, producers increase the quantity supplied to the market. But last year, the price of oranges was really high and the supply of them was really low. The economists are wrong!"
How will a substantial increase in the demand for housing affect the wages and employment of carpenters, plumbers, and electricians? OR, for that matter, how will a substantial decrease in the demand for housing affect these wages? (Here is an article dealing with this issue from Sunday's Birmingham News.)
What's wrong with this way of thinking? "Economists argue that lower prices will result in fewer units being supplied. However, there are exceptions to this rule. For example, in 1972, a very simple ten-digit electronic calculator sold for $120. By 2000, the price of the same type of calculator had declined to less than $5. Yet business firms produced and sold many such calculators in 2000 than they did in 1972. Lower prices did not result in less production or in a decline in the number of calculators supplied."
This weekend, Alabama plays the University of Arkansas (the"Razorbacks") in beautiful Fayetteville, Arkansas. Assume that at one hour before the game, it appears that many people want to go to the game but cannot find tickets for sale at the their face value. Verbally and graphically describe this market. Can you graph it? What role are scalpers playing?
Today's Birmingham News reports that there are fewer shortages in gasoline in Alabama, relative to other states, in the aftermath of Hurricane Ike. What does this tell us about relative price flexibility in Alabama compared to those other states? Explain graphically.
Which of the following is a positive economic statement?
a. An increase in the minimum wage will reduce employment.
b. The minimum wage should be increased to reduce poverty.
c. Social conscience demands that we increase the minimum wage.
d. Thoughtful people oppose an increase in the minimum wage.
Which of the following do you think would lead to an increase in the current demand for beef?
a. higher pork prices
b. higher consumer income
c. higher prices of feed grains used to feed cattle
d. widespread outbreak of mad cow or foot-and-mouth disease
e. an increase in the price of beef
Try this exercise (for fun).
Previous test question:
Talladega Superspeedway, which holds almost 200,000 spectators, is in the tiny town of Talladega, Alabama.
What must happen for shortages and surpluses to persist?(3 points) On the weekend of the big race, hotel rooms in Talladega rent for $300 per night. On non-race weekends, they rent for $50 per night. Why?
(4 points) What happens if the Talladega City Council imposes an ?anti-gouging? ordinance that caps the price of rooms at $50 per night?
What socially beneficial results occur when relative prices rise? I.e., what is their effect on consumers and producers? How is this related to Smith's "invisible hand"?
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