REVIEW CHAPTER 3

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1. Definethepriceelasticityofdemandandshowhowitiscalculated

2. Explainwhathappenswithtotalrevenuewhenthepriceofagoodincreases

3. Whendosuppliersgetthemaximumincomefromsellingtheirproduct?

4. Whataredemaininfluencesontheelasticityofdemandthatmakethedemandforsome

goodselasticandthedemandforothergoodsinelastic?

5. Whyisthedemandforaluxurygenerallymoreelasticthanthedemandforanecessity?

6. Whatdoestheincomeelasticityofdemandmeasure?

7. Whatdoesthesignoftheincomeelasticityofdemandtellusaboutagood?

8. Whatdoesthecrosselasticityofdemandmeasure?

9. Whatdoesthesignofthecrosselasticityofdemandtellusabouttherelationshipbetween

twogoods?

10. Definetheelasticityofsupplyandshowhowitiscalculated

11. Whataredemaininfluencesontheelasticityofsupply?

12. Provideexamplesofgoodsorserviceswhoseelasticitiesofsupplyare:a)zero;b)greater

thanzeroandlessthanone;c)greaterthanone

13. Whatisapriceceilingandwhatareitseffectsifitissetabovethemarketequilibriumprice?

14. Whataretheeffectsofapriceceilingthatissetbelowthemarketequilibriumprice?

15. Howarescarcegoodsrationedwhenamaximumpriceisinplace?

16. Whatisaminimumwageandwhatareitseffectsifitissetabovetheequilibriumwage?

17. Explainhowscarcejobsareallocatedwhenaminimumwageisinplace

18. Whatistheeffectofsettingasalestaxonthesupplyanddemandcurvesofagood?

19. Howdoestheelasticofdemandinfluencetheincidenceofatax?

20. Howdoestheelasticofdemandinfluencethetaxrevenue?

21. Summarizetheeffectsofaproductionquotaonthemarketpriceandthequantity

produced

22. Summarizetheeffectsofasubsidyonthemarketpriceandthequantityproduced

23. Howdoestheimpositionofapenaltyforsellingandillegaldruginfluencedemand,supply,

price,andthequantityofdrugconsumed

24. Summarizetheeffectsofinternationaltradeondomesticpricesanddomesticproduction

25. Whatarethetoolsthatagovernmentcanusetorestrictinternationaltrade’

26. Explaintheeffectsofatariffondomesticproduction,domesticconsumptionandtheprice

27. Explaintheeffectsofanimportquotaondomesticproduction,domesticconsumptionand

theprice

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REVIEW CHAPTER 3

Define the price elasticity of demand and show how it is calculated
Explain what happens with total revenue when the price of a good increases
When do suppliers get the maximum income from selling their product?
What are de main influences on the elasticity of demand that make the demand for some goods elastic and the demand for other goods inelastic?
Why is the demand for a luxury generally more elastic than the demand for a necessity?
What does the income elasticity of demand measure?
What does the sign of the income elasticity of demand tell us about a good?
What does the cross elasticity of demand measure?
What does the sign of the cross elasticity of demand tell us about the relationship between two goods?
Define the elasticity of supply and show how it is calculated
What are de main influences on the elasticity of supply?
Provide examples of goods or services whose elasticities of supply are: a) zero; b) greater than zero and less than one; c) greater than one
What is a price ceiling and what are its effects if it is set above the market equilibrium price?
What are the effects of a price ceiling that is set below the market equilibrium price?
How are scarce goods rationed when a maximum price is in place?
What is a minimum wage and what are its effects if it is set above the equilibrium wage?
Explain how scarce jobs are allocated when a minimum wage is in place
What is the effect of setting a sales tax on the supply and demand curves of a good?
How does the elastic of demand influence the incidence of a tax?
How does the elastic of demand influence the tax revenue?
Summarize the effects of a production quota on the market price and the quantity produced
Summarize the effects of a subsidy on the market price and the quantity produced
How does the imposition of a penalty for selling and illegal drug influence demand, supply, price, and the quantity of drug consumed
Summarize the effects of international trade on domestic prices and domestic production
What are the tools that a government can use to restrict international trade’
Explain the effects of a tariff on domestic production, domestic consumption and the price
Explain the effects of an import quota on domestic production, domestic consumption and the price

Price Elasticity and Supply: An Economic Analysis - Prof. Puchades, Apuntes de Economía

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REVIEW CHAPTER 3