understand the market and allocative efficiency

Another active learning strategy brought to the heaps cool economics students at wellington college by the douceinator

Instructions

1.stand behind your desk2.challenges will be shown on the screen3.answer by following instructions 4.if your answer is incorrect sit down5.challenges are repeated until there is

only one student remaining6.the last person remaining standing is

the class survivor

Lets Start

The production possibility curve/frontier shows the maximum output combination of two goods that can be produced with existing resources and technology

HAND UP HAND DOWNcorrect incorrect

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the slope of the PPC shows opportunity cost

HAND UP HAND DOWNtrue false

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the bowed PPC shape is caused by

HAND UP HAND DOWNdiminishing constant returns returns

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all points on the PPC line are

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allocative productionefficient efficient

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the production of which type of good will increase a country’s future productive capacity?

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capital goods consumer goods

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industries which are losing their importance in the economy are known as:

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sunrise sunset industries industries

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diminishing returns can only occur in the

HAND UP HAND DOWNlong run short run

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if a price is set above the market equilibrium, which of the following is created?

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a shortage a surplus

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a decrease in demand results in:

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fall in equilibriumrise in equilibriumprice price

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the triangle area between the demand curve and the price line is called the: HAND UP HAND DOWN

producer consumer surplus surplus

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The point on the graph where there is neither a shortage or a surplus is called: HAND UP HAND DOWN

market allocativeequilibrium efficiency

both answers are correct

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After the introduction of a sales tax, the consumer surplus gets smaller

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false true

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deadweight loss only occurs when the government intervenes in the market

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true false

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in the midpoint formula for calculating price elasticity of demand, the change in quantity demanded is on the:

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top line bottom line

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when the price elasticity of demand coefficient is greater than one, demand is

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inelastic elastic

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at high prices, price elasticity of demand tends to be more

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elastic inelastic

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perfectly elastic demand is

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horizontal vertical

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If a firms Total Revenue falls after they increase the price of their product, the demand for their product is:

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elastic inelastic

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The government will raise more revenue is they put a sales tax on goods that are:

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elastic inelastic

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The incidence of a sales tax on an inelastic product falls more heavily on the

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consumer producer

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The following are characteristics of what kind of elasticity:

addictive, few substitutes, necessities

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elastic inelastic

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If the response to a given change in price is a less than proportionate change in quantity demanded, then the products demand is

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inelastic elastic

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If the cross elasticity of demand coefficient is negative, then the two goods are

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complements substitutes

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If two goods are substitutes and the price of one good goes up, the demand for the other good will

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shift left shift right

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Quantity demanded of one product falls and this causes the demand curve for another product to shift left. The cross elasticity of demand coefficient must be

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negative positive

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which of the following are likely to have a negative cross elasticity of demand?

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vegemite vegemiteand toast and marmite

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If the income elasticity of demand coefficient for a good is negative, then the good is an

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inferior good normal good

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If quantity demanded and income changes are in the same direction, then the good is

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normal inferior

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if the income elasticity of demand coefficient for a good is greater than one, then the good is a HAND UP HAND DOWN

normal luxury normal necessity

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the perfectly inelastic supply curve is

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vertical horizontal

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If the coefficient of price elasticity of supply is less than one, then the supply is

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elastic inelastic

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supply in the short run tends to be more

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inelastic elastic

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the momentary supply curve (supply on a given day) is

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vertical horizontal

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If the response to a given change in price is a more than proportionate change in quantity supplied, then the supply is

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elastic inelastic

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The current dollar value of a wage adjusted for changes in the price level is called

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real wage nominal wage

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If the current wage rate is below the equilibrium wage rate then which of the following occurs in the labour market?

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shortage of excess labourlabour

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the current dollar value of a wage adjusted for changes in the price level is called

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real wage nominal wage

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If the real wage rate increases, then the amount of voluntary unemployment

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decreases increases

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A minimum wage causes unemployment to

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decrease increase

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If NZ goods are exported overseas, then the domestic price

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falls rises

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NZ will import a good if its price is lower than the domestic price

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false true

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The world supply curve is horizontal because

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the world can supply NZ importersunlimited quantity want to raiseat this price the price

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if demand is elastic, the greater incidence of a sales tax falls on the

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consumer producer

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If a good has inelastic demand, and the government introduces a subsidy, then the greater incidence falls on the

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consumer producer

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A deadweight loss is always created when the government pays subsidies to firms

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incorrect correct

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THE

END

Challenge 1

write down the 3 forumulas for determining price elasticity of demand

Challenge 2

demonstrate how the PPC shows

• scarcity• choice• opportunity cost• unemployment• diminishing returns

Challenge 3

draw a demand and supply curve and label

• allocative efficiency point• shade consumer surplus• shade producer surplus

Challenge 4

draw a graph that shows a deawweight loss occuring and explain it

Challenge 5

draw 3 supply curves and show which is

• most inelastic• more elastic• monentary supply

Challenge 6

draw the labour market showing no involuntary unemployment

Challenge 7

Draw and label the labour market showing no volunatary unemployment

Challenge 8

draw and label a supply and demand graph showing the producer incidence and producer incidence of a sales tax for an elastic good

Challenge 9

Draw and label a demand and supply curve showing consumer and producer incidence of an inelastic good after a sales tax is imposed

Challenge 10

1.Draw and label a supply and demand graph showing a subsidy.

2.Shade the consumer and producer incidence

3.shade the total cost of the subsidy to the government

4.shade the DWL

Challenge 11

1.draw a graph showing supply and demand for sheep in NZat a low price

2.draw a graph showing supply and demand for sheep at a higher price in Canada

3.show what will happen under free trade