- •3. Difference between micro and macro economics.Role of economists in making policy
- •4 . Absolute advantage and comparative advantage.
- •5. How comparative advantage explains the gains from trade
- •6.The meaning of market. Determine the characteristics of competitive market
- •7.Describe a type of market that is not perfectly competitive
- •8.Determine the demand for a good in a competitive market.
- •14.Explain the relationship between total revenue and the price elasticity of demand
- •11.Describe the role of prices in market economies
- •12.The meaning of the elasticity of demand.Determine the elasyicity of Demand
- •13.Explain the ways of computing the price elasticity of demand
- •15.Explain the meaning and types of the elasticityof Supply. Determine the elasticity of Supply
- •17. Describe the different types of controls on prices. Give the real world examples of these two kinds of price controls.
- •18. Explain how price ceilings affect market outcomes. Draw the graphs.
- •19. Explain how price floors affect market outcomes. Draw the graphs.
- •21. The meaning of tax. Explain how taxes on buyers affect market outcomes.
- •22. How does elasticity affect the burden of a tax? Justify your answer using supply-demand diagrams.
- •24. Explain how to define and measure producer surplus.
- •25. Using a demand-supply diagram, explain and identify the following areas:consumer surplus, producer surplus, total surplus.
- •26. The meaning of total surplus in a market, and describe why might it be a good measure of economic well-being. Using a demand-supply diagram, show the areas representing total surplus
- •27. Name two types of market failure. Explain why each may cause market outcomes to be inefficient
- •28. Explain how taxes reduce consumer and producer surplus.
- •29. The meaning and causes of the deadweight loss from a tax.
- •30 Describe why some taxes have larger deadweight losses than others. Explain how tax revenue and deadweight loss vary with the size of a tax.
- •31. Explain the Laffer curve and supply-side economics.
- •32. Explain what determines whether a country imports or exports a good.
- •33. Explain who wins and who losses from international trade.
- •37The meaning of tariff. Describe its economic effects.
- •39Determine the arguments people use to advocate trade restrictions.
- •40 Describe what happens to the gains from trade when a tax is imposed.
- •42 Describe why externalities can make market outcomes inefficient. Use the graphs to explain.
- •43 The types of private solutions to externality. Define the Coase theorem.
- •44. Determine why private solutions to externalities sometimes do not work
- •45. Identify the various government policies aimed at solving the problem of externalities
- •46. Describe the different kinds of goods, and give an example of each
- •47. The importance of free-rider problem. Explain why private markets fail to provide public goods.
- •Implicit Costs
- •53.Explain the various measures of cost. Give the meaning of average total cost and marginal cost and explain how they are related.
- •Variable Costs
- •54 Describe the relationship between short-run and long-run costs
- •55. Explain how competitive firms decide when to shut down production temporarily and how competitive firms decide whether to exit and enter a market?
- •56. Explain why some markets have only one seller. Describe how a monopoly determines the quantity to produce and the price to charge.
11.Describe the role of prices in market economies
Price has the most central roles in a market economy. It is the determinant demand, supply, and inflation. Lets just say that price is the heart of market economy. if the price goes up fast, inflation happens (just like someone's blood pressure shooting through the roof) and if prices go down, well thats when there is little certainty in the market and bad things happen again. If prices are stable with little inflation, then everyone lives happy.
As you study economics, you will learn that prices are the instrument with which the invisible hand directs economic activity. In any market, buyers look at the price when determining how much to demand, and sellers look at the price when deciding how much to supply. As a result of the decisions that buyers and sellers make, market prices reflect both the value of a good to society and the cost to society of making the good. Smith’s great insight was that prices adjust to guide these individual buyers and sellers to reach outcomes that, in many cases, maximize the well-being of society as a whole.
12.The meaning of the elasticity of demand.Determine the elasyicity of Demand
price elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price. The price elasticity of demand for any good measures how willing consumers are to buy less of the good as its price rises. Because the demand curve reflects the many economic, social, and psychological forces that shape consumer preferences, there is no simple, universal rule for what determines the demand curve’s elasticity. Based on experience, however, we can state some rules-of-thumb about what influences the price elasticity of demand
13.Explain the ways of computing the price elasticity of demand
The price elasticity of a good or service is calculated as the percent change in the quantity demanded of a good divided by the percent change in the price for that good. A price elasticity greater than one indicates that the good is elastic, that quantity demanded is highly sensitive to changes in price. For example, a 1-percent change in the price of chicken might cause a 5-percent decrease in sales. A price elasticity less than one tells you that your good is inelastic. In this case, price changes will have a small impact on quantity demanded. If a good/service has a price elasticity of one, also called unitary elasticity, this means that a 5-percent change in price will result in a 5-percent change in quantity demanded.
Price elasticity of demand = Percentage change in quantity demanded./Percentage change in price
14.Explain the relationship between total revenue and the price elasticity of demand
Price elasticity tells how much of an impact a change in price will have on the consumers' willingness to buy that item
Total revenue is calculated as the quantity of a good sold multiplied by its price. It is a measure of how much money a company makes from selling its product, before any costs are considered. Obviously, the goal of a company is to maximize profits, and one way to do this is by increasing total revenue. The company can increase its total revenue by selling more items or by raising the price.
Why Elasticity Matters
Price elasticity of demand and total revenue are closely interrelated because they deal with the same two variables, P and Q. If your product has elastic demand, you can increase your revenue by decreasing the price of that good. P will decrease, but Q will increase at a greater rate, thus increasing total revenue. If the product is inelastic, then you can actually raise prices, sell slightly less of that item but make higher revenue. As a result, it is important for management to know whether its product has inelastic or elastic demand.
some general rules:
• When demand is inelastic (a price elasticity less than 1), price and total
revenue move in the same direction.
• When demand is elastic (a price elasticity greater than 1), price and total
revenue move in opposite directions.
• If demand is unit elastic (a price elasticity exactly equal to 1), total revenue
remains constant when the price changes.