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Problem Set #2

Problem Set #2. Score your own Practice FRQs. FRQ #1: 10 Points Total. FRQ #1. 10 Point Total 2point Drawing and labeling a supply and demand graph with equilibrium price and quantity 2point (a) Drawing and labeling a decrease (leftward shift) in supply

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Problem Set #2

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  1. Problem Set #2

  2. Score your own Practice FRQs

  3. FRQ #1: 10 Points Total

  4. FRQ #1 • 10 Point Total • 2point Drawing and labeling a supply and demand graph with equilibrium price and quantity • 2point (a) Drawing and labeling a decrease (leftward shift) in supply • 2point (b) Drawing and labeling an increase (rightward shift) in demand • 2point (c.i) Price increases • 2point (c.ii) Quantity is indeterminate

  5. FRQ #2: 10 Points Total

  6. 10 Point Total • 1point (A)Drawing and labeling an increase (rightward shift) in supply. • 1point Stating that price decreased and quantity increased. • 2point (B) Price Floor (line) drawn above equilibrium • 1point (B.i) Quantity demanded decreases • 1point (B.ii) Quantity supplied increases • 2point (B.iii) Consumers surplus decreases • 1point (C.i) Price decreased after • 1point (C.ii) Qd increased, Qs decreased

  7. Instructions • Put away you pen and pencils • Put your name on the bottom of the page. • We will grade questions 1, 2, 4, and 6 • After grading each question, write in their score in the blank. ex: ( ____/5) • Follow the directions explicitly!

  8. 1. Key Concepts 5 Points Each

  9. 1a. Laws of Demand and Supply • 5 Point Total • 1 Points- Correct definition of Law of Demand • (Inverse relationship between price and QUANTITY demanded) • 1 Points- Example of Law of Demand • 1 Points- Correct definition of Law of Supply • (Direct relationship between price and QUANTITY supplied) • 1 Points- Example of Law of Supply • 1 Points- Clarity of examples

  10. 1b. Laws of Dim. Marg. Utility • 5 Point Total • 2 Points- Correct definition of the Law of Diminishing Marginal Utility • (As you consume more of any good, the additional satisfaction from each new unit will eventually start to decrease) • 2 Points- Example of the Law • 1 Points- Clarity of example

  11. 1c. Normal and Inferior • 5 Point Total • 1 Points- Correct definition of normal good • (when income increased, demand increases) • 1 Points- Example of normal good • 1 Points- Correct definition of inferior good • (when income increased, demand decreases) • 1 Points- Example of inferior good • 1 Points- Clarity of examples

  12. 1d. Consumers and Producers Surplus • 5 Point Total • 1 Points- Correct definition of Consumers Surplus • (difference between the amount a buyer is willing to pay and the price they do pay) • 1 Points- Example of CS • 1 Points- Correct definition of Producers Surplus • (difference between the price and the sellers minimum price) • 1 Points- Example of PS • 1 Points- Clarity of examples ?

  13. 2a. S&D Notesheet 5 Points Total

  14. 2a. Notesheet 5 Point Total Note sheet: Demand and Supply 5 points if completed entirely. NO blanks. (exclude the second S&D graph on the back) 4 points if one graph or section blank 3 points if two sections blank 2 points if three sections blank 1 point if four sections bank

  15. 2b. S&D Practice Sheet 15 Points Total

  16. 2a. Practice Sheet • 15 Point Total • 1 point- for EACH problem correctly analyzed and labeled. (14 points) • Don’t worry about the shifter. • 1 point- if every problem is attempted. No Blanks. • Before grading, quickly check the labeling of each graph. • If any curve is not labeled OR if Pe, Qe, P1 or Q1 are missing mark the answer incorrect.

  17. 2a. Practice Sheet • 1 Point Each (circle their mistake) • D decrease, P and Q decrease • S decrease, P increase and Q decrease • D increase, P and Q increase • S decrease, P increase and Q decrease • S decrease, P increase and Q decrease • D increase, P and Q increase • S increase, P decrease and Q increase • D increase, P and Q increase • S decrease, P increase and Q decrease • No shift, surplus, P increase, Qd dec. Qs inc. • S increase, P decrease and Q increase • S increase, P decrease and Q increase • No shift, Ceiling below eq, P dec. Qd inc. Qs dec • S inc AND D inc, P Indeterminate and Q inc

  18. 4b. FRQ: 10 Points Total

  19. 4b. FRQ • 10 Point Total(Graphs must be correctly labeled to earn point) • 1 point- increase/rightward shift in supply for laptops (Must have Graph) • 1 point- i. decreased price for laptops • 1 point-ii. increased quantity (output) for laptops • 1 point- iii. TR increases for laptops • 1 point- decrease/leftward shift in demand for desktops (Must have Graph) • 1 point- iv. decreasing price for desktops • 1 point- v. decrease quantity for desktops • 1 point- increase/rightward shift in demand for DVD burners (Must have Graph) • 1 point- vi. increase in price for DVD burners • 1 point- vii. increase quantity for DVD burners

  20. Question #6: 10 Points Total

  21. Question #6 • a. 4 Point Total • 1 Points- Correct Marginal Utility for CDs • 1 Points- Correct Marginal Utility for DVDs • 1 Points- Correct Marginal Utility per $ for CDs • 1 Points- Correct Marginal Utility per $ for DVDs

  22. Question #6 • b. 3 Point Total • 1 Point- for identifying the correct utility maximizing combination as 2 CDs and 4 DVDs • 2 Points- Explanation- • To find the utility maximizing combination first you must calculate per dollar (MU/P). (1 point) • You continue buying the good with the highest marginal utility per dollar until you reach the income constraint of $100.(1 point)

  23. Question #6 • c. 3 Point Total • 1 Point- for identifying the correct utility maximizing combination as 3 CDs and 5 DVDs • 2 Points- Explanation- • With an additional $30 you should buy one more CD and one more DVD.(1 point) • You continue buying the good with the highest marginal utility per dollar until you reach the income constraint of $130.(1 point) ?

  24. 2a. Practice Sheet • 1 Point Each (circle their mistake) • D decrease, P and Q decrease • S decrease, P increase and Q decrease • D increase, P and Q increase • S decrease, P increase and Q decrease • S decrease, P increase and Q decrease • D increase, P and Q increase • S increase, P decrease and Q increase • D increase, P and Q increase • S decrease, P increase and Q decrease • No shift, surplus, P increase and Q decrease • S increase, P decrease and Q increase • S increase, P decrease and Q increase • No shift, Ceiling below eq, P dec and Q dec • S inc AND D inc, P Indeterminate and Q inc

  25. 4b. FRQ • 10 Point Total(Graphs must be correctly labeled to earn point) • 1 point- increase/rightward shift in supply for laptops (Must have Graph) • 1 point-i. decreased price for laptops • 1 point- ii. increased quantity (output) for laptops • 1 point- iii. TR increases for laptops • 1 point- decrease/leftward shift in demand for desktops (Must have Graph) • 1 point- iv. decreasing price for desktops • 1 point- v. decrease quantity for desktops • 1 point- increase/rightward shift in demand for DVD burners (Must have Graph) • 1 point- vi. increase in price for DVD burners • 1 point- vii. increase quantity for DVD burners

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