Econ Unit 2 Test

The price of framed pictures of Parker Howard increases from $500 to $550. The quantity demanded decreases from 300 to 245. Calculate the price elasticity of demand.

The price of coffee increases from $3 to $3.30. The quantity demanded decreases from 1380 to 1300. Calculate the price elasticity of demand.

What are two factors that generally make a good more elastic?

An advertising campaign is launched for new Air Jordans. Does this affect demand or supply? What determinant does this fall under?

Workers at an Oreo factory go on strike but return with higher wages. What determinant of supply is this?

Name one reason the free market is naturally efficient (or one way the “invisible hand” guides the market toward efficiency).

If too many belts are being produced in the market, what will businesses naturally do with their prices? What will some producers naturally do?

What is your incentive to not waste leather while making gloves?

How will you know if a good or service you are producing isn’t valued by society?

Adam Smith was a proponent of free markets but described a problem that happens when they are left unchecked. What was it?

The United States can produce more bananas than Guatemala if all resources are put into banana production. What is this concept called?

Guatemala can produce bananas more efficiently (at a lower opportunity cost) than the United States. What is this concept called?

A storm causes a tree to fall on your roof, and your neighbor claims that hiring a company to repair it is good for the economy. Explain why this is an economic fallacy.

Draw a labeled Supply and Demand graph where supply is relatively inelastic, and demand is relatively elastic. Shade the consumer surplus.

Draw a labeled Production Possibility Curve (PPC) for guns and butter.

COVID-19 introduces new complex safety regulations for factories. Draw a Supply and Demand Curve and shift the correct curve in the correct direction. Label the new curve S1 or D1.

How has economics contributed to the increase in drug overdoses in the United States?

Why is it difficult to track down data on illegal drug markets?