# Economics 2302

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Economics 2302
Prof. Mohammad Moghadassian
Econ 2301
February 29, 2012

Writing Assignment
Section 1:

1. Equilibrium Price
Qs = Qd
QUANTITY SUPPLIED
P = 2 + 0.2Qs
P - 2 = 0.2Qs
(P - 2)/0.2 = Qs
QUANTITY DEMAND
P = 10 - 0.2Qd
0.2Qd = 10 - P
Qd = (10 - P)/0.2

(P - 2)/0.2 = (10 - P)/0.2
P - 2 = 10 - P
P + P = 10 + 2
2P = 12
P = 6

2. Equilibrium quantity

6 = 2 + 0.2Qs
6 - 2 = 0.2Qs
4 = 0.2Qs
4/0.2 = Qs
Qs = 20
6 = 10 - 0.2Qd
0.2Qd = 10 - 6
0.2Qd = 4
Qd = 4/0.2
Qd = 20 3.

4.
A)

B) An increase in demand will create a shortage, which increases the equilibrium price and equilibrium quantity.
C) This product is a NORMAL good

Section 2:
The business cycle describes the growths and declines that an economy will experience over a length of time. Businesses go through a pattern of ups and downs in their activity level similar to a roller coaster. The value of the activity level is measured from peak to peak by gross domestic product (or GDP) and will fluctuate over a period of time. The five stages of the business cycle are growth (expansion), peak, recession (contraction), trough and recovery. Although long term patterns are predictable their frequency, magnitude, and duration are irregular.
Part A)
The business cycle is characterized by four main phases. During economic growth or expansion there is a “Boom” period of rapid economic growth, prosperity. During this time, the level of aggregate demand for goods and services is very high. Typically, businesses use the opportunity of a boom to raise output and also widen their profit margins. The energy is high and unemployment is low as economy creates new jobs. An economic boom occurs when real GDP grows faster than the trend rate of economic growth. An example of this is the housing market boom earlier this century. As the US shed manufacturing jobs in the 1980s and 1990s, the Federal Government and Federal Reserve tried to compensate by boosting jobs in construction and other

Cited: Amadeo, Kimberly. "Causes of an Economic Recession." About.com US Economy. About.com, 26 Jan. 2012. Wed. 25 Feb. 2012. &lt;http://useconomy.about.com/od/grossdomesticproduct/a/cause_recession.htm&gt;. Isadore, Chris. "It 's Official: Recession since Dec. '07." CNNMoney. Cable News Network, 01 Dec. 2008. Web. 24 Feb. 2012. &lt;http://money.cnn.com/2008/12/01/news/economy/recession/index.htm&gt;. Rampbell, Catherine. "The Recession Has (Officially) Ended." Economix Blog. New York Times, 20 Sept. 2010. Web. 24 Feb. 2012. &lt;http://economix.blogs.nytimes.com/2010/09/20/the-recession-has-officially-ended/&gt;. Sanibel, Michael. "Why Today 's "Recession" Tops The Great Depression." Investopedia. Www.investopedia.com, 27 Sept. 2011. Web. 25 Feb. 2012. &lt;http://www.investopedia.com/financial-edge/0911/Why-Todays-Recession-Tops-The-Great-Depression.aspx&gt;. Weisburg, Jacob. "The 15 Best Explanations for the Great Recession." Slate Magazine. Www.slate.com, 9 Jan. 2010. Web. 25 Feb. 2012. &lt;http://www.slate.com/articles/news_and_politics/the_big_idea/2010/01/what_caused_the_economic_crisis.html&gt;. Burns, Arthur F., and Wesley C. Mitchell. Measuring Business Cycles. New York: National Bureau of Economic Research, 1946. Friedman, Milton, and Anna Jacobson Schwartz. A Monetary History of the United States, 1867–1960. Princeton: Princeton University Press for NBER, 1963. Romer, Christina D. “Changes in Business Cycles: Evidence and Explanations.” Journal of Economic Perspectives 13 (Spring 1999): 23–44. Romer, Christina D. “Remeasuring Business Cycles.” Journal of Economic History 54 (September 1994): 573–609.

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