Eco 365 Final

1137 Words Jun 13th, 2011 5 Pages
Final Exam
University of Phoenix

Question One What is the most important determinant of price elasticity of demand? Why is this so? Price elasticity that relates to demand is determined by many factors. Price elasticity is measured by the change in price and the response from consumer demand. The demand of a good or service will vary the price in the item. The most important factor to determine the price elasticity of demand is necessity. If a good is a necessity, the demand will seldom change and the price is able to be adjusted. The demand is the most important due to the freedom it provides for price adjustment and inventory control. With necessity comes an inelastic price. Other factors such as the
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If the slandering works the candidate will win the Senate seat by lowering their competitors credibility.

Question Four Choose one of the three types of market failure and give a real world example of it. Do you believe the government has the ability to solve this problem?

Public goods are one of the main types of market failures that the government often has the ability to solve. Public goods such as medical, education, and employments can be seen as market failures. An example of a public good would the post office. The government controls the majority of shipping and package delivery but also the ability to solve the problem of lost budgets annually and the increasing rates of shipping. The post office is a necessity and is failing based on the lost revenue every year. The post office is also losing its labor supply based on the loss income and profit. The government can allow for the post office to become publicly run where a profit can be made and allow for an oligopoly to keep prices low with removed competition. The government has the option of stepping out of the market and allowing it to grow within a free market system. Question Five Define the concept of comparative advantage. How can a country gain or lose its comparative advantage in the production of a good?

Comparative advantage is the concept that production can be conducted with lower opportunity cost than a competitor. The lower cost of

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