What are the major determinants of a product's price elasticity of demand? Studies indicate that the demand for Florida oranges, Bayer aspirin, watermelons, and airfares to Europe are elastic. Why?
Former Detroit mayor Kwame Kilpatrick proposed last year a 2 percent fast food tax in Detroit, with the stated purpose of trying to alter the incentive to eat fast food (as opposed to the purpose of raising revenue). Is his proposal, if passed, likely to be successful? Will it raise much revenue? Answer in terms of elasticity of demand. (Note: the tax proposal was rejected by Detroit voters.)
Assume that real incomes fell during the 1990-1991 recession by 10 percent, and that the demand for Yugos increased by 15 percent. Can you determine an income elasticity measure?
Your book notes that the measure of the income elasticity for food is 0.51. Why do you suppose that the measure is inelastic for this good? Would you expect it to increase if looking at specific categories of food? Why or why not?
Define: income elasticity, cross elasticity, and elasticity of supply. What signs would you expect for these measures? Why?
In producer theory, how are costs of production derived? What are the three assumptions of producer theory? How are they related to scarcity? What role does the consumer play?
In a market economy, what do firms do? What are residual claimants? Differentiate between the three types of firms discussed in class.
Differentiate between the explicit, implicit costs that firms face. What are total costs? What sunk costs?
What is economic profit? How might it differ from accounting profit? Explain why firms that are making zero economic profit are likely to continue in business.
Which of the following statements do you think reflect sound economic thinking? Explain your answer.
a. "Because we own rather than rent, and the house is paid for, housing doesn't cost us anything."
b. "I own 100 shares of stock that I can't afford to sell until the price goes up enough for me to get back at least my original investment."
c. Private education is costly to produce, whereas public schooling is free."
Former Detroit mayor Kwame Kilpatrick proposed last year a 2 percent fast food tax in Detroit, with the stated purpose of trying to alter the incentive to eat fast food (as opposed to the purpose of raising revenue). Is his proposal, if passed, likely to be successful? Will it raise much revenue? Answer in terms of elasticity of demand. (Note: the tax proposal was rejected by Detroit voters.)
Assume that real incomes fell during the 1990-1991 recession by 10 percent, and that the demand for Yugos increased by 15 percent. Can you determine an income elasticity measure?
Your book notes that the measure of the income elasticity for food is 0.51. Why do you suppose that the measure is inelastic for this good? Would you expect it to increase if looking at specific categories of food? Why or why not?
Define: income elasticity, cross elasticity, and elasticity of supply. What signs would you expect for these measures? Why?
In producer theory, how are costs of production derived? What are the three assumptions of producer theory? How are they related to scarcity? What role does the consumer play?
In a market economy, what do firms do? What are residual claimants? Differentiate between the three types of firms discussed in class.
Differentiate between the explicit, implicit costs that firms face. What are total costs? What sunk costs?
What is economic profit? How might it differ from accounting profit? Explain why firms that are making zero economic profit are likely to continue in business.
Which of the following statements do you think reflect sound economic thinking? Explain your answer.
a. "Because we own rather than rent, and the house is paid for, housing doesn't cost us anything."
b. "I own 100 shares of stock that I can't afford to sell until the price goes up enough for me to get back at least my original investment."
c. Private education is costly to produce, whereas public schooling is free."
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