Using the supply and demand curves, show what would happen if there was a. a $2.00 decrease in price b. a decrease in the price of a direct…

1.     Using the supply and demand curves, show what would happen if there was

a.     a $2.00 decrease in price

b.     a decrease in the price of a direct substitute

c.     a social trend toward using this product

d.     an increase in the production costs of this product

e.     an increase in the efficiency of the production of the product

f.      a government tax on the suppliers of this product

g.     an excise tax increase (determine the impact of an excise tax)

2.     What is the difference between a shift in demand and a shift in quantity demanded? (use a demand curve to illustrate)

3.     Explain price floors and price ceilings with examples and the result each intervention has on markets.

4.     Explain the concept of price elasticity of demand. What affects the elasticity of demand? Discuss the elasticity of demand for several products. Why is their demand more elastic or inelastic?

5.     Calculate the numerical elasticity of demand coefficient for the product on the following chart if the price increases from $0.15 to $0.20. Would you consider this product to have an elastic or inelastic demand? What happens to revenue if you raise or lower prices for this product?

6.     For the market with supply and demand curves above, what would be the impact of an excise tax of $0.10?

7.     How would you calculate economic profit if you were trying to determine whether to run your own business or work for an employer?

8.    Explain the Law of Diminishing Returns.

9  When does the law of diminishing returns begin to take effect in the case above?

10.    Compare the characteristics of the competitive structures of perfect competition, monopoly, oligopoly and monopolistic competition.

11.     Explain economies of scale and how they give companies a competitive advantage.

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