Recitation 3: Questions
1. What is the difference between a command economy and a laissez-faire
economy?
2. What is the economic problem? How does a command economy solve the
economic problem?
3. Explain the law of demand. What does it imply about the shape of the demand curve?
4. What is the difference between a demand schedule and a demand curve?
5. Explain the difference between a change in demand and a change in quantity
demanded.
6. In what ways can expectations change your demand for a product today?
7. Compare and contrast the concepts of income and wealth. Are these measured as a
stock or a flow? Explain.
8. John's income has just increased by $10,000 per year. If Ramen noodles is an
inferior good in John’s opinion, what will happen to his demand for Ramen noodles?
Show your answer using a graph.
9. Show graphically (in two separate graphs) the effects of an increase in the price of
peanut butter on the demand for peanut butter and on the demand for jelly.