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Constructing a PPF

To make it easy to compare answers, be sure to put her output of lectures on the y -axis.

8 Layla’s PPF

Constructing a PPF

To make it easy to compare answers, be sure to put her output of lectures on the y -axis.

8 Ted’s PPF

Who has the comparative advantage in giving lectures? In writing? (Hint: You need to calculate the opportunity cost of each activity for each actor.) Economist
Opportunity Cost of
Giving Lectures
Opportunity Cost of
Writing Pages
Layla
3 pages/lecture
1/3 lecture/page
Ted
6 pages/lecture
1/6 lecture/page

The Circular-Flow Diagram Refer to the graphs below. Each graph represents one country. Which country should specialize in the production of chips? Refer to the graphs below. Each graph represents one country. Which country should specialize in the production of chips? • a. Country A

What amount of chips can country A consume that will make both countries better off after specialization and trade? Fill in all of the blanks, but the answer you submit should be the value for X. What amount of chips can country A consume that will make both countries better off? Demand Schedules and Quantity Demanded

Demand curve: A curve that shows the relationship between the price of a product and the quantity of the product demanded. A demand schedule and a
demand curve

Demand Curve and Market Demand

Market demand: the demand by all the consumers of a given good or service. A demand schedule and a
demand curve

When drawing the demand curve, we assume ceteris paribus – all variables except price and quantity are assumed to be held constant. A demand schedule and a
demand curve

The Law of Demand

Implication: Demand curve slopes downward A demand schedule and a
demand curve

A shift to the left (D 1to D 3) is a decrease in demand. Shifting the demand curve

As the demand curve shifts, the quantity demanded changes at every possible price. P
1
Q 2
Q 1
Q 3

Change in Income of consumers

A good for which the demand decreases as income rises, and increases as income falls. Effect of increase in income, if good is normal Effect of increase in income, if good is inferior

Change in the Price of Related Goods

Goods and services that are used together. Effect on demand for Big Macs, if price of Whopper increases Effect on demand for Big Macs, if price of McDonald’s fries increases

Change in Demand vs. Change in Quantity Demanded

This is a change in demand. A change in demand versus a change in quantity demanded

Refer to the graph below. The dot represents a point on the individual’s yearly demand curve for rock concerts. Which of the following interpretations of the dot on this graph is correct? Refer to the graph below. The dot represents a point on the individual’s yearly demand curve for rock concerts. Which of the following interpretations of the dot on this graph is correct? • b. When one rock concert costs \$125, this individual goes to five of them per year.

On the graph below, draw the direction of change for the demand curve for concert tickets when consumers' incomes rise, ceteris paribus. Assume that concert tickets are a normal good. Price of Rock Concerts
(\$)
D1

On the graph below, draw the direction of change for the demand curve for concert tickets when consumers' incomes rise, ceteris paribus. Assume that concert tickets are a normal good. D2
Price of Rock Concerts
(\$)
D1