Written Assignment 1 MicroEconomics
Written Assignment 1
Answer all of the following questions. Title your assignment "Written Assignment 1," unless your mentor directs otherwise. This assignment covers text chapters 1 through 6.
1. Define scarcity. Provide examples of goods that are not scarce.
Answer:
Scarcity is when demand exceeds supply.
Examples of goods that are not scarce – air and water
2. How does Adam Smith's concept of the invisible hand explain why markets move toward equilibrium? Do market participants need to know about the invisible hand for it to function? Explain your answer.
Answer:
Adam Smith’s concept of the invisible hand explains why markets move toward equilibrium because it does not limit consumers or producers of their choices on what to buy or sell. Manufactures/producers and customers choose to freely of what to sell or buy. Yes, market participants need to know the visible hand for it to function. Both manufactures and consumers need to understand the full benefit of the visible hand in order to understand how consumer’s interest regulates demand and supply of the market
3. Use the demand curve graph found at the following link to answer the questions that follow.
• How would point A be represented as an ordered (x,y) pair?
Answer: Quantity, Price (20,24)
• What does this curve show?
Answer: An increase in income causes the demand curve to move towards the right. Also, as income increases the quantity of goods purchased increases.
• Does this curve show a positive or negative correlation between price and quantity?
Answer: The curve shows a negative correlation between price and quantity
• Compute the slope of D1 between points A and C.
Answer: Slope is -2/5 (16-24)/(40-20) = -2/5
• What is the slope of D1 between points C and E? Why would you not have to calculate this answer?
Answer: The slope has already been calculated. The slope will be the same as part D.
• What is it called if we move from curve D1 to curve D2?
Answer: An increase in Demand
• How do you
Answer all of the following questions. Title your assignment "Written Assignment 1," unless your mentor directs otherwise. This assignment covers text chapters 1 through 6.
1. Define scarcity. Provide examples of goods that are not scarce.
Answer:
Scarcity is when demand exceeds supply.
Examples of goods that are not scarce – air and water
2. How does Adam Smith's concept of the invisible hand explain why markets move toward equilibrium? Do market participants need to know about the invisible hand for it to function? Explain your answer.
Answer:
Adam Smith’s concept of the invisible hand explains why markets move toward equilibrium because it does not limit consumers or producers of their choices on what to buy or sell. Manufactures/producers and customers choose to freely of what to sell or buy. Yes, market participants need to know the visible hand for it to function. Both manufactures and consumers need to understand the full benefit of the visible hand in order to understand how consumer’s interest regulates demand and supply of the market
3. Use the demand curve graph found at the following link to answer the questions that follow.
• How would point A be represented as an ordered (x,y) pair?
Answer: Quantity, Price (20,24)
• What does this curve show?
Answer: An increase in income causes the demand curve to move towards the right. Also, as income increases the quantity of goods purchased increases.
• Does this curve show a positive or negative correlation between price and quantity?
Answer: The curve shows a negative correlation between price and quantity
• Compute the slope of D1 between points A and C.
Answer: Slope is -2/5 (16-24)/(40-20) = -2/5
• What is the slope of D1 between points C and E? Why would you not have to calculate this answer?
Answer: The slope has already been calculated. The slope will be the same as part D.
• What is it called if we move from curve D1 to curve D2?
Answer: An increase in Demand
• How do you