Economics 247 Assignment 1 Version A
This assignment has a maximum total of 100 marks and is worth 10% of your total grade for this course. You should complete it after completing your course work for Units 1 through 5. Answer each question clearly and concisely.
3/3Define opportunity cost, and explain its importance in economics. (3 marks) -The opportunity cost of something is what you must give up of one thing, in order to get it. Opportunity cost is a key concept of economics because it is described as expressing the basic relationship between scarcity and choice. Opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently.
b. 4/4The province of British Columbia hosted the 2010 Olympic Games and invested millions of dollars in improvements to facilities for these events. How would one determine the opportunity cost of the 2010 Olympic Games?
(4 marks) -In order to determine the opportunity cost of the 2010 Olympic Games, we must consider what they could have done with the money if they had invested it elsewhere, so let’s say they would have used this money in order to built a new arena for the Vancouver Canucks well the opportunity cost of the Olympics is the new arena. We should also consider the Event Benefits minus the Event Costs.
2. Use the graph below to answer the questions that follow.
(2 marks each) 6/6
a. What type of curves are these? Do these curves show a positive or negative correlation between price and quantity? The curves in the above graph are demand curve. They show a negative correlation between price and quantity because demand increases as the price decreases.
b. Calculate the slope of the curve between points A and C. (Please show your work.) Rise over run;
Slope = y/x
Y- $24.00 drops to $16.00 = -$8.00
X- 20 to 40 = +20
slope: -8/+20 = -.40
c. Explain the difference between a “change in quantity demanded” and a “change in demand.” A change in quantity demanded is a change in the specific quantity of a good that buyers are willing and able to buy. Change in quantity demanded is caused by a change in the demand price. It’s a movement along a given demand curve. A change in demand refers to an increase or decrease in demand brought about by a change in conditions of non-price determinants. It’s a shift in the demand curve (to the right or left).
3. Which of the following statements are positive, and which are normative? (1 mark each) 5/5
a. The minimum wage creates unemployment among young and unskilled workers. Positive.
b. The minimum wage ought to be abolished.
c. If the price of a product in a market decreases, other things equal, quantity demanded will increase. Positive.
d. A little bit of inflation is worse for society than a little bit of unemployment. Normative.
e. There is a tradeoff between inflation and unemployment in the short run. Positive.
4. Use the graph below to answer the questions that follow.
(2 marks each)
a. 2/2Analyze the effect a $300 price ceiling would have on the market. What would be the size of the shortage or surplus? Would this be a binding price ceiling? Why or why not?
Because the price ceiling is below the equilibrium price, a $300.00 price ceiling would have a binding constraint and would cause a shortage of 4,000.00 (7,000-3,000) b. 2/2Analyze the effect a $700 price floor would have on this market. What would be the size of the shortage or surplus? Would this be a binding price floor? Why or why not?
Because the price floor is above the equilibrium price, a $700.00 price floor would have a binding constraint and would cause a surplus of 4,000.00
c. List and explain two reasons why policymakers would choose to impose a price ceiling or price floor.
Policymakers impose a price ceiling to set a limit on how high a price for something can go, and a price floor to set a limit on how low something can be sold for. An example of a...
Please join StudyMode to read the full document