Test 2 - application Flashcards
Which goods are likely to be elastic?
goods with many substitutes, luxury goods, goods that are a large % of consumer budget, analyzing in a long time frame
Coca-Cola, designer bags, cars
Which goods are likely to be inelastic?
Necessities, goods with few substitutes, goods that are a small % of consumer budget, analyzing in a short time frame
groceries, insulin, chapstick
A flatter demand curve indicates…
more elasticity
A steeper demand curve indicates…
less elasticity
How will elasticity differ at different ends of the demand curve?
Higher price range will be more elastic. Lower price range will be less elastic.
If price increases and total revenue goes down, what does this indicate?
This good is elastic
If price decreases and total revenue goes down, what does this indicate?
This good is inelastic
If the price of Birkin bags increased, what would happen to total revenue?
It would decrease
If the price of water utilities decreased, what would happen to total revenue?
It would decrease
Would a farm, soda factory, or shirt factory be more elastic in changing to produce blankets?
A shirt factory would be the most elastic (sewing, fabric, and tools are common resources), a soda factory would be less elastic (labor is the only common resource, probably), a farm would be inelastic (going from a planted field to clothing manufacturing is a difficult change)
Would it be more profitable to tax boat sales, alcohol sales, or book sales?
alcohol sales- inelastic goods will be bought regardless
If a new tax is imposed on insulin, will it have a greater impact on consumers or suppliers?
consumers
taxes impact the more inelastic curve. the demand for insulin is very inelastic, people need it to live. the supply for insulin is more elastic, they can redirect their resources to create different medications.
John can buy tea or coffee. Tea costs $1 and has a marginal utility of 5, decreasing by 1 with each marginal increase. Coffee costs $2 and has a marginal utility of 7, decreasing by 2 with each marginal increase.
What is John, rational consumer he is, likely to purchase first & at what point will his choice change?
John will buy tea first, as it has a marginal utility per dollar of 5. He will change his choice to coffee by the third purchase, as that is when the MU/$ of tea and coffee are equal
What challenges might a sole proprietorship face?
struggle growing from local to national. more individual responsibility
Is a company that sells stock a proprietorship, partnership, or corporation?
corporation
McDonalds issues new stock for $100 and sells 8 shares. Dan buys 4 shares and trades them 2 years later for $800.
How much money has McDonalds made from their stock?
$100
How does risk differ between investing in stock, mutual funds, and index funds?
Stock > mutual funds > index funds
An investment company is offering a fund of small tech companies stock. What kind of fund is this?
a mutual fund
An investment company is offering a fund with an equal division of a broad range of stocks. What kind of fund is this?
an index fund
