EC4004 TA Worksheet Week 4

EC4004 TA Worksheet Week 4 Concepts I covered this week 1. Supply and Demand, individual and market 2. Elasticity of demand, supply, and income 3. Income/Substitution effects, consumer surplus & producer surplus. Relevant chapters are 3, 4, and 5 from the book. Book shortages should be sorted by the start of week 4. Week 4’s test will be on stuff from chapter 4 and chapter 5 of the book. Test Questions 1. What are the advantages and disadvantages of the price system? 2. Suppose the price of new houses has risen, and the number of new houses has also risen. We can conclude that a. the demand for new homes has risen b. the law of demand has been violated c. new firms have entered the construction industry d. construction firms must face higher costs 3. A good that provides external benefits to society has a. to few resources devoted to its production b. too many resources devoted to its production c. the optimal number of resources devoted to its production d. no provided profits to the producers of the good. 4. Will each of the following changes in price cause total revenue to increase, decrease, or remain unchanged? a. Price falls, demand is elastic b. Price rises, demand is elastic c. Price falls, demand is unitary elastic d. Price rises, demand is unitary elastic e. Price falls, and demand is inelastic f. Price rises, and demand is inelastic 5. Compute the elasticity of demand using the data below. Price Quantity Supplied Elasticity 10 50 8 40 6 30 4 20 2 10 0 0 6. Which of the following pairs of goods has the higher elasticity of demand? a. Oranges, Sunkist oranges b. cars, salt c. Foreign travel in the short run, foreign travel in the long run.