Exam (elaborations)
ECON 1B03 - Chapters 1-6 Midterm Study
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ECON 1B03: Chapters 1-6 Midterm Study
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1-117 of 117What is the formula for producer surplus?
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PS = P - WTS
What does Eab measure and what is its formula?
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Measures the response of Qd of good A to a change in price of good B.
Eab = change in Qd of good A / change in P of good B
What does microeconomics focus on?
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Focuses on specific markets/industries
How do we use the Coase Theorem?
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Take a look at who has the property rights (PR) and make the costs and
benefits make sense.
What happens when both S and D shift?
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, The equilibrium of P and Q will depend on the magnitude. If we don't know
the magnitude of the change, then we consider 3 scenarios. 1) is where Q
and S shift at the same amount, 2) is when demand shifts more, 3) is when
supply shifts more. From drawing these we'll see that one of the variable
stays the same regardless, but one will change (we call that variable
ambiguous)
When is En income inelastic?
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-1 < En < 1 - this means the good is a necessity
Consider Qd = 10 + 0.0004N - 2A - 2P, (A is price of related good), what do the signs
of A tell us?
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The sign of A tells us if the goods are substitutes or complements. If
postitive, the goods are substitutes. If negative, the goods are
complements.
What is the law of supply?
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, P and Qs are positively related, if P goes up so does Qs as firms want to
supply more / sell more at this raised price.
What is the law of demand?
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P and Qd are negatively related, if Price goes up then Qd goes down and
vice versa
What is WTS?
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The lowest price a seller will take to produce a good
Is elasticity constant along the demand curve?
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No! A change from $1 -> $2 is 100% increase but from $9 -> $10 is a lot less
What does autarky mean?
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