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Muffin Mix Lemon Juice Pirates Oligopullies Fish Sticks 100 100 100 100 100 200 200 200 200 200 300 300 300 300 300 400 400 400 400 400 500 500 500 500 500 Summarize the Law of Demand. Draw & label a demand curve. As a consumer, you buy more when the price is low. If you want to buy more of something, which way does the demand curve shift? To the RIGHT Define elasticity of demand. Give one example of an inelastic good. As the producer do you want to raise or lower the price on an inelastic good? Elasticity measures how we react to a change in prices. Some things, INELASTIC, we always have to buy so quantity is basically constant. Other things we will stop buying. Inelastic we have to buy so you want to raise the price. Name one substitute and one complement for a hamburger. Substitute--pizza Complement--milkshake What does ceteris paribus mean? All else held constant. Can’t evaluate changes in economy when looking at multiple variables. Summarize the law of supply. Draw a supply curve. As a producer you want to sell more when the price is high. Explain the difference between a subsidy and an excise tax. Subsidies are gov’t payments to lower the price…we buy more. Excise taxes are meant to raise the price…we buy less. What is the most expensive cost of production for most businesses? LABOR How are fixed and variable costs different? Provide on example of each. Fixed costs, like capital, can be bought once and reused…pitcher. Variable costs, like land and labor, need to be bought each time…like lemons. What does marginal mean? EXTRA or ONE MORE Where do you find happiness? Draw it on the board. Who is more unhappy whenever the market price is set too high? Why? The producer is unhappy because of the excess supply. They have a surplus of their product, which means they are losing money. Why would the government use a price ceiling? Give an example of one. Price ceilings used to keep prices down so we can afford to buy the INELASTIC things we have to. Price ceiling on milk or rent. What question do you ask yourself to determine which curve will shift? Does it affect the cost of producing the product? If the price of milk goes up, what will happen to the cost of buying cereal? Explain. Milk and cereal are complements…if the price of milk goes up, we buy less milk. Buying less milk results in less demand for buying cereal. A decrease in demand shifts the curve to the left, reducing price and quantity. Define market power. As a producer do you want it? Market Power is the ability to change prices. Yes, you want it because market power is what allows you to make a profit. Compare price fixing with price wars. As consumers, which do we prefer? Price fixing involves agreeing to keep prices high while price wars involve fighting to have the lower price. As consumers we like to see price wars. Compare PC, MC, O, & M in terms of their market power. List running least to greatest. What will most limit how much money you can make as a business? Number of competitors…that’s why market power is so critical. How can producers use price discrimination to make more money? By charging people based on what they are willing to pay they can make more money. If someone will pay $1.00 for a candy bar let them. If someone else would pay $2.00 then charge them 2.00. You make more money. How long can cockroaches live after their heads have been cut off? a)12 minutes b)5 hours c)9 days d)13 months 9 days How many trees does it take to print the Sunday edition of the New York Times? a) 10,000 b) 43,000 c) 89,000 d) 5 million b) 43,000 trees How much liquid (in weight) can the average disposable diaper hold? a) 10 ounces b) 1.5 pounds c) 4 pounds d) 7 pounds 7 pounds How many hamburgers has McDonald’s sold since opening? a) Over 5 million b) Over 300 million c) Over 35 billion d) Over 100 billion Love the Mac…over 100 billion Who founded economics? What book did he write? What year was it published?