Problem Set #2

Score your own Practice FRQs

FRQ #1:10 Points Total

10 Point Total 2point Drawing and labeling a supply and

demand graph with equilibrium price and quantity

2point (a) Drawing and labeling a decrease (leftward shift) in supply

2point (b) Drawing and labeling an increase (rightward shift) in demand

2point (c.i) Price increases2point (c.ii) Quantity is indeterminate

FRQ #1

FRQ #2:10 Points Total

10 Point Total 1point (A) Drawing and labeling an increase

(rightward shift) in supply. 1point Stating that price decreased and

quantity increased. 2point (B) Price Floor (line) drawn above

equilibrium1point (B.i) Quantity demanded decreases1point (B.ii) Quantity supplied increases2point (B.iii) Consumers surplus decreases

1point (C.i) Price decreased after 1point (C.ii) Qd increased, Qs decreased

Instructions1. Put away you pen and pencils2. Put your name on the bottom of the

page.3. We will grade questions 1, 2, 4, and 64. After grading each question, write in

their score in the blank. ex: ( ____/5)5. Follow the directions explicitly!

1. Key Concepts5 Points Each

5 Point Total 1 Points- Correct definition of Law of Demand

(Inverse relationship between price and QUANTITY demanded)

1 Points- Example of Law of Demand1 Points- Correct definition of Law of Supply

(Direct relationship between price and QUANTITY supplied)

1 Points- Example of Law of Supply1 Points- Clarity of examples

1a. Laws of Demand and Supply

5 Point Total 2 Points- Correct definition of the Law of

Diminishing Marginal Utility(As you consume more of any good, the additional

satisfaction from each new unit will eventually start to decrease)

2 Points- Example of the Law 1 Points- Clarity of example

1b. Laws of Dim. Marg. Utility

5 Point Total 1 Points- Correct definition of normal good(when income increased, demand increases)1 Points- Example of normal good1 Points- Correct definition of inferior good(when income increased, demand decreases)1 Points- Example of inferior good1 Points- Clarity of examples

1c. Normal and Inferior

5 Point Total 1 Points- Correct definition of Consumers Surplus(difference between the amount a buyer is willing

to pay and the price they do pay)1 Points- Example of CS1 Points- Correct definition of Producers Surplus(difference between the price and the sellers

minimum price)1 Points- Example of PS1 Points- Clarity of examples

1d. Consumers and Producers Surplus

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2a. S&D Notesheet5 Points Total

5 Point Total Note sheet: Demand and Supply

5 points if completed entirely. NO blanks.(exclude the second S&D graph on the back)

4 points if one graph or section blank3 points if two sections blank2 points if three sections blank1 point if four sections bank

2a. Notesheet

2b. S&D Practice Sheet15 Points Total

15 Point Total 1 point- for EACH problem correctly analyzed and

labeled. (14 points)Don’t worry about the shifter.

1 point- if every problem is attempted. No Blanks.

Before grading, quickly check the labeling of each graph.

If any curve is not labeled OR if Pe, Qe, P1 or Q1 are missing mark the answer incorrect.

2a. Practice Sheet

1 Point Each (circle their mistake) 1. D decrease, P and Q decrease2. S decrease, P increase and Q decrease3. D increase, P and Q increase4. S decrease, P increase and Q decrease5. S decrease, P increase and Q decrease6. D increase, P and Q increase7. S increase, P decrease and Q increase8. D increase, P and Q increase 9. S decrease, P increase and Q decrease 10. No shift, surplus, P increase, Qd dec. Qs inc.11. S increase, P decrease and Q increase12. S increase, P decrease and Q increase13. No shift, Ceiling below eq, P dec. Qd inc. Qs

dec14. S inc AND D inc, P Indeterminate and Q inc

2a. Practice Sheet

4b. FRQ:10 Points Total

10 Point Total (Graphs must be correctly labeled to earn point)

1 point- increase/rightward shift in supply for laptops (Must have Graph)

1 point- i. decreased price for laptops1 point-ii. increased quantity (output) for laptops1 point- iii. TR increases for laptops1 point- decrease/leftward shift in demand for

desktops (Must have Graph)1 point- iv. decreasing price for desktops1 point- v. decrease quantity for desktops1 point- increase/rightward shift in demand for

DVD burners (Must have Graph)1 point- vi. increase in price for DVD burners1 point- vii. increase quantity for DVD burners

4b. FRQ

Question #6:10 Points Total

a. 4 Point Total 1 Points- Correct Marginal Utility for CDs1 Points- Correct Marginal Utility for DVDs1 Points- Correct Marginal Utility per $ for CDs1 Points- Correct Marginal Utility per $ for DVDs

Question #6

b. 3 Point Total 1 Point- for identifying the correct utility

maximizing combination as 2 CDs and 4 DVDs2 Points- Explanation- To find the utility maximizing combination first

you must calculate per dollar (MU/P). (1 point)You continue buying the good with the highest

marginal utility per dollar until you reach the income constraint of $100. (1 point)

Question #6

c. 3 Point Total 1 Point- for identifying the correct utility

maximizing combination as 3 CDs and 5 DVDs2 Points- Explanation- With an additional $30 you should buy one more

CD and one more DVD. (1 point)You continue buying the good with the highest

marginal utility per dollar until you reach the income constraint of $130. (1 point)

Question #6

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1 Point Each (circle their mistake) 1. D decrease, P and Q decrease2. S decrease, P increase and Q decrease3. D increase, P and Q increase4. S decrease, P increase and Q decrease5. S decrease, P increase and Q decrease6. D increase, P and Q increase7. S increase, P decrease and Q increase8. D increase, P and Q increase 9. S decrease, P increase and Q decrease 10. No shift, surplus, P increase and Q decrease11. S increase, P decrease and Q increase12. S increase, P decrease and Q increase13. No shift, Ceiling below eq, P dec and Q dec14. S inc AND D inc, P Indeterminate and Q inc

2a. Practice Sheet

10 Point Total (Graphs must be correctly labeled to earn point)

1 point- increase/rightward shift in supply for laptops (Must have Graph)

1 point-i. decreased price for laptops 1 point- ii. increased quantity (output) for laptops1 point- iii. TR increases for laptops1 point- decrease/leftward shift in demand for

desktops (Must have Graph)1 point- iv. decreasing price for desktops1 point- v. decrease quantity for desktops1 point- increase/rightward shift in demand for

DVD burners (Must have Graph)1 point- vi. increase in price for DVD burners1 point- vii. increase quantity for DVD burners

4b. FRQ