Econ

1.) Demand curves are downward sloping because of the ________ e§ect and the substitution e§ect.

2.) ________ goods are those goods where following an income increase QD > income. Moreover, assume QD is positive.

3.) Supply elasticity generally varies based on the availability of inputs and ________.

4.) Examples of economic agents include: Örms, individuals, ________, and nations.

5.) Typically we expect cheese in general to have more inelastic own price demand than a particular variety

of cheese like Swiss. Thus, the more ________ deÖned the good, the more elastic is own price demand. 6.) A key Önding of our discussion of surplus was the free markets are usually e¢ cient, but central

________ is usually not e¢ cient, unless the outcome is the same as the market outcome.

7.) The di§erence between a consumerís willingness to pay and the ________ is deÖned as consumer

surplus.

8.) ________ e¢ ciency means that the consumers with the greatest valuation of a good, are the ones

that actually consume it.

9.) Suppose two goods have a cross-price elasticity of 1.5 then the goods are classiÖed as ________. 10.) The circular áow diagram contains two markets, the ________ market and the ________

market.

11.) If it is possible to carry out a Pareto improvement then it must be the case that the initial allocation

________ e¢ cient.

12.) If a good has an income elasticity equal to :75 then we would classify the good as ________ and

a ________.

13.) A reasonable cross-price elasticity for Keystone Light and Busch Light (both are inexpensive domestic

lager beers) would be ________.

14.) The combination (p; q) is e¢ cient because it maximizes ________.

15.) Suppose Robinson Crusoe can gather 30 coconuts in a week, or spear 40 Ösh in a week. Assume his

time is equally well suited to both activities and he can split his time between the two activities as he sees Öt. Then the opportunity cost of an extra Ösh is ________.

16.) Todd used to eat lots of O&H kringle, then he won a Mega Millions lottery jackpot and left Wisconsin to live in Denmark where he eats lots of Anders Andersenís kringles and now only occasionally eats O&H when he is visiting Racine. This means that O&H kringle is a(n) ________ good for Todd.

17.) Consider the market for Leonís frozen custard. The owner of Leonís gets wasted and shouts nasty things about his customer base. His drunken rant is recorded and shows up on Youtube where it gets lots of attention. Then it is likely ________ for Leonís Frozen custard will ________. This will cause p to decrease and for q to decrease as well.

18.) Consider the market for cherries. Suppose everyone comes to believe that in another week cherries will be more expensive. Then we can expect that at present p will ________ and q will ________. 19.) Consider the market for cotton. Suppose (1) in general folks are starting to prefer wool, and (2) that the primary manufacturer of cotton undershirts has just discovered that the proÖt margin on silk ties (which they also produce) has risen. We can expect that in the cotton market p will ________ and q will

________.

20.) Consider the market for bottled water. Suppose (1) Haterade (a substitute) becomes cheaper, and (2)

Colt .45 (another substitute) becomes cheaper. Then we can expect that in the market for bottled water p will ________ and q will ________.

21.) Consider the market for seats at Lambeau Öeld for the upcoming Bears-Packers game. Initially tickets are priced at $150 a seat and attendance is expected to be 81,441. Media reports the game will feature additional halftime entertainment featuring a death match between 5 meat packing plant employees with knives and an

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extremely angry and aggressive grizzly bear. As a response to this news, equilibrium ticket prices jump to $412 and attendance is ________. Then it must be the case that supply is perfectly inelastic.

22.) Consider the market for Apple airpods. Suppose (1) in general folks come to feel that airpods are bad for the environment, and (2) possession of airpods has the ability to make other people think you are rich (this is seen as a positive thing). We can expect that p will ________ and q will ________.

23.) Every point on the demand curve represents an individualís ________ or equivalently, how much they value the good in question.

24.) The ________ price is the y-intercept of the demand curve. Above this price, quantity demanded is equal to zero.

25.) The revenue test tells us that if revenue increases following a price increase, it must be the case that demand is ________.