Chapter 5 Pre-lecture Reading Assignment The following questions and exercises are meant to complement the reading assignments from the text. They will prepare you for the material presented in the lectures. Read the text first and then write or type out the answers to the following questions. It is okay to use definitions right out of the textbook. When asked for examples however, be sure to ones that are different from those in the text. Your answers should be typed (or written) and saved as a pdf and uploaded to D2L (in D2L, choose the Assessments tab and then Dropbox.) In word you can choose to save your document as a pdf, or Cam Scanner is a nice app you can put on your phone to turn pictures into a pdf and then you can upload the pdf directly to D2L. Please do not restate the questions in your answers: Tonly want to read your answers. When you are writing out an answer, number your answers with the associated number on the question and use complete sentences and punctuation in your text. Finally, leave at least one row in between the answers for each question. 1. Define price elasticity of demand using the book's definition. а. Now explain elasticity as though you were explaining it to your 10 year old sister. You can use quotes or dialogue if that feels easier to you. Use an example in your explanation that is not included in the text. 2. What are the four rules of thumb about what influences the price elasticity of demand? 3. Create an example of a good that has perfectly inelastic demand and be sure to include how you would know if it is perfectly inelastic. 4. Define income elasticity of demand. а. Give an example of a good that has a negative income elasticity and one that has a positive income elasticity and explain why. 5. What typically causes the price elasticity of supply to be high or low? 6. What is total revenue and how do you calculate it? When price drops and the quantity of demand increases, there are two reasons that revenue changes. Some goods are now produced that weren't previously produced and those goods that were produced before, are now being sold at a lower price. How do you know if revenue will go up or down? 7. During a three month period the price of natural gas decreased from $4.81 per 1000 cubic ft to $4.44 per 1000 cu ft. As a consequence during this three month period the total quantity of natural gas consumed in the US a. increased from 62.21 billion cubic feet per day to 62.64 billion cubic feet per day. Draw a graph with price on the vertical axis and quantity on the horizontal axis. Label your axes with units. Draw a downward sloping demand curve. Draw and label the first quantity and price amounts (Q1 and P1) and the second quantity and price amounts (Q2 and P2). b. Use the following formula to plug in your P's and Q's and calculate the price elasticity of demand for natural gas. a. (Q2-Q1) Q2+Q1\ 2 Epemand remember to drop the negative sign (P2-P1)' (P2+P1 2

Chapter 5 Pre-lecture Reading Assignment The following questions and exercises are meant to complement the reading assignments from the text. They will prepare you for the material presented in the lectures. Read the text first and then write or type out the answers to the following questions. It is okay to use definitions right out of the textbook. When asked for examples however, be sure to ones that are different from those in the text. Your answers should be typed (or written) and saved as a pdf and uploaded to D2L (in D2L, choose the Assessments tab and then Dropbox.) In word you can choose to save your document as a pdf, or Cam Scanner is a nice app you can put on your phone to turn pictures into a pdf and then you can upload the pdf directly to D2L. Please do not restate the questions in your answers: Tonly want to read your answers. When you are writing out an answer, number your answers with the associated number on the question and use complete sentences and punctuation in your text. Finally, leave at least one row in between the answers for each question. 1. Define price elasticity of demand using the book's definition. а. Now explain elasticity as though you were explaining it to your 10 year old sister. You can use quotes or dialogue if that feels easier to you. Use an example in your explanation that is not included in the text. 2. What are the four rules of thumb about what influences the price elasticity of demand? 3. Create an example of a good that has perfectly inelastic demand and be sure to include how you would know if it is perfectly inelastic. 4. Define income elasticity of demand. а. Give an example of a good that has a negative income elasticity and one that has a positive income elasticity and explain why. 5. What typically causes the price elasticity of supply to be high or low? 6. What is total revenue and how do you calculate it? When price drops and the quantity of demand increases, there are two reasons that revenue changes. Some goods are now produced that weren't previously produced and those goods that were produced before, are now being sold at a lower price. How do you know if revenue will go up or down? 7. During a three month period the price of natural gas decreased from $4.81 per 1000 cubic ft to $4.44 per 1000 cu ft. As a consequence during this three month period the total quantity of natural gas consumed in the US a. increased from 62.21 billion cubic feet per day to 62.64 billion cubic feet per day. Draw a graph with price on the vertical axis and quantity on the horizontal axis. Label your axes with units. Draw a downward sloping demand curve. Draw and label the first quantity and price amounts (Q1 and P1) and the second quantity and price amounts (Q2 and P2). b. Use the following formula to plug in your P's and Q's and calculate the price elasticity of demand for natural gas. a. (Q2-Q1) Q2+Q1\ 2 Epemand remember to drop the negative sign (P2-P1)' (P2+P1 2

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter3: Your Role As A Consumer

Section3.3: Consumerism

Problem 5R

See similar textbooks