NCSU ARE 201 Questions and Answers

NCSU ARE 201 Questions and Answers 3 Assumptions (class) 1)Perfect Info 2) People maximize happiness and firms maximize profits 3)Everybody faces constraints 3 Key Ideas (book) 1) People are rational 2) People respond to initiatives 3) Optimal decisions are made at the margin Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:00 / 0:15 Full screen Brainpower Read More Positive econ. "what is" Normative econ. "what ought to be" Production Possibilities Frontier A graph of all the combinations of 2 goods a frim can produce given constraints Traditional Economy no thought process; do what your parents did Planned Economy Gov. tells you what to do Market Economy Individuals decide based on resources & prices Total Economic Cost accounting cost + opportunity cost PPF Recession Anytime you are inside the PPF Curve Gross Domestic Production Recession 2 calender quarters of -GDP growth Qd amount of a good that an individual is willing & able to purchase at a given price Demand curve shows all the different Qd's at all different price leves Law of Demand increase in price will cause a decrease in Qd 3 exceptions to Law of Demand 1)Perfectly inelastic demand 2)Perfectly elastic demand 3)Giffen curve Percfectly inelastic demand Same Qd no matter the price Perfectly elastic demand Same price no matter the Qd Giffen curve As price increases so does quantity Qd=a-bP a= x-intercept slope= 1/b Change in Qd is caused by 1) Change in Qd 2) Change in income 3) Change in taste Qs Amount of a good a firm is willing & able to produce at a given price Law of Supply Increase in price causes an increase in Qs 2 exceptions to the Law of Supply 1) Perfectly Inelastic supply 2)Perfectyl Elastic supply Perfectly inelastic supply Same Qs no matter the price Perfectly elastic supply Same price no matter the Qs Change in Qs is caused by 1) change in technology 2) change in price of substitutes (what other items you can produce 3) change in # of firms 4) change in input price 5) change in climate 6) change in expected price Total Revenue (TR) Amount of $ in the register (Price times Quantity) TR Inelasticity Decrease in price causes decrease in Qd TR Elasticity Decrease in price causes increase in Qd Elasticity of Demand (Ed) Ed = % change in Q / % change in P OR (((Q1-Q2) / (Q1+Q2)) / ((P1-P2)/ (P1+P2))) Inelastic Demand I Ed I 1 In words, a 1% change in P will cause a _-X_% change in Qd OR Decrease in P causes an increase in TR Elastic Demand I Ed I 1 In words, a 1% change in P will cause a _+X_% change in Qd OR Decrease in P causes an incraese in Tr Elasticity of Income (((Q1-Q2) / (Q1+Q2)) / ((I1-I2)/ (I1+I2))) Ei 0 Good is inferior Ei 0 Good is normal 0 Ei 1 Good is a necessity and normal