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Economics Homework 3 - Model (view source)
Revision as of 02:29, March 27, 2013
, 02:29, March 27, 2013Created page with "1. What is a substitute for french fries, and what is a complement for them? : 2. Give an example of a good that has a large price elasticity, meaning that a small decrease in..."
1. What is a substitute for french fries, and what is a complement for them?
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2. Give an example of a good that has a large price elasticity, meaning that a small decrease in price causes a big increase in demand.
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3. Explain the concept of income elasticity.
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4. In connection with price elasticity of demand, a nearly perfectly elastic demand curve is nearly ________ in shape, while a nearly perfectly inelastic demand curve is nearly __________ in shape.
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5. '''''Why''''' is the name "necessity" given to a good that has an income elasticity of less than one, and the name "luxury" given to a good that has an income elasticity of more than one?
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6. Give an example of a "normal" good, and an example of an "inferior" good.
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7. A "price ceiling" is a type of price control that sets the maximum price allowed by law for something (like a real ceiling). A "price floor" is a type of price control that sets a minimum price allowed by law for something (like a real floor). Does a price ceiling that is set below the equilibrium (free market) price cause a surplus or a shortage? Using the graph in this lecture, explain why a surplus or a shortage is created by a price ceiling.
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2. Give an example of a good that has a large price elasticity, meaning that a small decrease in price causes a big increase in demand.
:
3. Explain the concept of income elasticity.
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4. In connection with price elasticity of demand, a nearly perfectly elastic demand curve is nearly ________ in shape, while a nearly perfectly inelastic demand curve is nearly __________ in shape.
:
5. '''''Why''''' is the name "necessity" given to a good that has an income elasticity of less than one, and the name "luxury" given to a good that has an income elasticity of more than one?
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6. Give an example of a "normal" good, and an example of an "inferior" good.
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7. A "price ceiling" is a type of price control that sets the maximum price allowed by law for something (like a real ceiling). A "price floor" is a type of price control that sets a minimum price allowed by law for something (like a real floor). Does a price ceiling that is set below the equilibrium (free market) price cause a surplus or a shortage? Using the graph in this lecture, explain why a surplus or a shortage is created by a price ceiling.
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