Economics and Opportunity Cost
Chapter 1 & 2
1. Identify whether each of the following transactions takes place in the factor market or the product market.
a. Billy buys a sofa from Home Time Furniture for his new home. Factor market
b. Home Time Furniture pays its manager her weekly salary. Product market
c. The manager buys dinner at Billy’s Café. Product market
d. After he pays all of his employees their wages and pays his other bills, the owner of Billy’s Café takes his profit. Factor market
2. List the opportunity costs of the following:
a. going to college - the money you would have earned if you worked instead.
b. missing a lecture – takes away from your knowledge of that lesson. …show more content…
b. Congress places a 26 percent tax on salsa.
Most people will stop buying salsa or not as much.
c. Ed Scissorhands introduces a new, faster vegetable chopper.
More people would by this product and not need the other products and more of a demand for this will happen.
d. J. Lo, Beyonce, and Adam Sandler each introduce a new brand of salsa.
Well seeing that they all really don’t have any experience with food I think people will all buy it till they try it and then go back to their regular salsa. So the demand will b very high at first then go down.
7. How might your elasticity of demand for copying and binding services vary if your work presentation is next week versus in two hours?
The quantity demanded increases.
8. How is total surplus (the sum of consumer and producer surpluses) related to the efficient level of output? Using a supply and demand curve, demonstrate that producing less than the equilibrium output will lead to an inefficient allocation of resources—a deadweight loss.
9. In each of the following cases, indicate which good you think has a relatively more price elastic demand and identify the most likely reason, in terms of the determinants of the elasticity of demand (more substitutes, greater share of budget, or more time to adjust).
a. cars or Chevrolets
Chevrolet’s, it’s less of a decision. Cars can be