MICROECONOMICS CHAPTER 1 The Market Economy What is to be done? —Lenin When future historians look back on the close of the 20th century‚ one of the most sweeping changes they will note is the collapse of centrally planned economies in Eastern Europe. It is not far off to say that the Cold War between the United States and the Soviet Union was won not by the armies of the United States and its allies‚ but by the productive power of Western market economies. Mikhail Gorbachev‚ then leader of the Soviet
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Are you familiar with the Law on Diminishing Marginal Utility? This law is based on a theory in Economics which affects the consumer behavior based on utility. Utility is the desire of a person in purchasing a product or service. Marginal utility is the satisfaction that a person gets from the additional product or service he consumes. The law on diminishing marginal utility states that as product or service consumed increases‚ the utility is decreasing. Applying the concept in the present situation
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Utility is the economist’s term for the satisfaction a customer derives from the goods that they buy. Marginal utility is the increase in total utility arising from an increase in consumption by one more. For example‚ suppose I like eating bananas‚ and I have already eaten one banana; then the satisfaction I get from consuming a second banana is called by economists the marginal utility. Marginal utility is the utility gain from the consumption of one more item. Basically‚ economists are assuming
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possibility frontier shifts inwards. C) not enough technological progress to enable more output to be produced from existing levels of resources. D) insufficient demand for goods and services. 2) What does marginal analysis involve? A) Comparing marginal costs to marginal benefits. B) Comparing total costs to total benefits. C) Comparing average costs to average benefits. D) Subtracting total costs from total benefits. 3) The production possibility frontier shows:
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2008-AL-ECON-II Past Questions on Macroeconomics Prepared by A.Chow Unit 1 – National Income Accounting 1. Which of the following are included in the national income of Hong Kong? (1) government spending on public assistance. (2) commission from the sale of second-hand cars. (3) salaries of the employee of the Jockey Club. (4) receipts form the sale of stocks and shares. A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (3) and (4) only (90 -01) Refer to the following national income
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ECON1102 MACROECONOMICS 1 Session 2‚ 2012 Tutorial Test (Week 17-21 September) INSTRUCTIONS 1. Tutorial tests will be constructed from the following pool of short-answer questions. 2. Each Tutorial test will be comprised of a sufficient number of short-answer questions to add-up to a total of 20 marks. 3. The marks for each question provide an indication of how much is required to answer the question. 4. Tutorial tests may contain questions on different topics. 5. The set of short-answer
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Public Expenditure - Regulate Market Failures Market Failure - Is an economic situation where resources are misallocated - May be caused by two possible factors: ○ Market Power ○ Non-existence of Markets Why is Market Power a source of Failure? - Marginal Cost Pricing is not practised (P > MC) - There is a tendency for firms to behave according to profit-maximization motive because they have market power. - This type of market failure is borne from Imperfect Competition Non-Existence of Markets -
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Draw an indifference map for the two goods‚ where you consume 2 jars of jelly for each jar of peanut butter. 13. Draw a budget constraint and an indifference curve for Peanut Butter and Jelly. ( The indifference curve should take the same shape as the indifference curves in the previous question) Label the optimal bundle. 14. If the goods are substitutes then the cross price elasticity is positive or negative? 15. What does the marginal rate of substitution mean? 16. Draw a budget constraint
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price c. contest d. personal characteristics e. command 4. Marginal benefit is the benefit that a person receives from consuming a. a good or service until the person has grown tired of it. b. only goods and services that are free. c. one more unit of a good or service. d. all of the possible units of a good or service that can be consumed. e. one more unit of a good and is equal to the cost of producing the unit of the good. 5. The marginal benefit of a product is a measure of a good’s a. opportunity
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Economics Exam 1 Study Guide Vocabulary Opportunity Cost – the value of the opportunities lost Total Cost – the “all or nothing” cost of engaging in any activity Marginal Cost – describes how total costs change as I change the amount (or intensity) of the activity Benefits – The advantageous or desirable outcome of an action Inflation – an increase in the general level of prices Absolute Advantage – the ability to produce the same good using fewer inputs than any other producer. Production
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