1. Find an example of the “Big Three Questions” in Economics in recent headlines in the news. Summarize in three sentences how the example illustrates the question(s).
2. Sketch a supply and demand diagram for the iphone 5 market with price on the vertical axis and quantity on the horizontal axis. Identify the equilibrium price and quantity. Show and explain what will happen to the equilibrium price and quantity if: incomes are reduced because of increased taxes. Identify the new equilibrium price and quantity.
3. Sketch a production possibilities frontier (PPF) with food on the horizontal axis and Housing on the vertical axis. Pay attention to the slope of your curve; it should illustrate increasing opportunity costs of food in terms of housing. Identify the combinations of food and housing that are feasible, but not efficient. Identify the combinations that are not feasible. Show what will happen to the PPF if there is a severe and prolonged drought impacting the production of food. Label any changes in your diagram and explain the differences.
4. The market demand curve for cake is Qd = 200 – P and the market supply curve is Qs = 50 + 2P. What is the market equilibrium price and quantity of cake? Illustrate using a supply and demand diagram with labels for points of interest.
5. State precisely the (almost) laws of demand and supply and provide one example (in words not diagrams) of each law in operation. What are the “things” that are the same under the ceteris paribus assumption for each curve?