econ olympics

The Econ Olympics

The Econ Olympics

A big thanks to our proud sponsors:

The Econ Olympics

Section 1

Section 2.1

Section 2.2

Section 2.4

WILD CARD

The Econ

OlympicsSection 1

ScarcityThree

questionsPositively

Normative

Utility PPF

Chuck Norris does not own a house. He walks into random houses and people move.

Growth

In order for a resource to be scarce, it has to be and

Limited and Desirable

Total Pts. = Section 1

What are the three questions every economy must ask itself?

What to produce, how to produce, and for whom to produce.

Total Pts. =Section 1

“Based on GDP, 51 of the 100 largest economies in the world are corporations.” Is this a normative statement or a positive

statement? Why?

Positive, it’s a fact.


Use the numbers below to draw a

Total Utility graph and a

Marginal Utility graph.


Quantity Utility

0 0

1 9

2 17

3 22

4 25

5 24

12/10/2009 9

Quantity of

Computers

Produced

Quantity of

Cars Produced

3,000

0 1,000

B11,500

2,000

800600

Total Pts. =

• What is the opportunity cost of producing 600 cars?

• What does a point inside the line signify, and a point outside the line?

1,000 Computers

Inside – inefficientOutside – unattainable

Section 1

Explain the difference between growth, development, and

sustainability.

Growth – increase in output (quantitative)Development – increase in standard of living (qualitative)

Sustainability – balance between growth and preserving the environment


The Econ

OlympicsSection 2.1

Demand SupplyPrice

Ceiling

MarketsNormal vs.

Inferior

When Chuck Norris wants an egg, he cracks open a chicken.

Minimum Wage

Total Pts. =Section 2.1

Price

0 Quantity

Give four examples of situations when demand

could shift to the left.

D1

What is the relationship between price and quantity

demanded?

Prices ↑ Qty. demanded ↓Prices ↓Qty. demanded ↑


Price

0 Quantity

“A drought has destroyed the crops!”

How will this affect supply of corn?

Why does the supply curve slope upwards?

D

S

Supply will first shift to the left.Supply has a positive relationship

with price.

Using a diagram, explain what a price ceiling is, and what three consequences

are of doing this.

ShortagesQueuing (waiting lists)

RationsBlack markets for goods


Name the four markets and explain how they are different.


Monopoly – one firmOligopoly – a few large firms

Monopolistic competition – many medium sized firms selling different products

Perfect competition – countless small firms selling similar products

What is the difference between a normal good and an inferior good?

Give examples of each.


Normal good – as income increases, demand increases. (Cars)

Inferior good – as income increases, demand decreases. (Use of public transportation)

A minimum wage is a price floor, and employers cannot go

below this wage. One consequence will be

unemployment.


Using a diagram, explain what a minimum wage

is, and what some consequences are.

D

Quantityoflab

or

Price

3

2

200 600

4

S

100

Unemployment

PriceFloor

The Econ

OlympicsSection 2.2

Elasticity PED XED

YED PES

If you work in an office with Chuck Norris, don't ask him for his three-hole-punch.

Revenue

What are three determinants of elasticity of demand?

Time, necessity, luxury, substitutes, portion of income


What does price elasticity of demand tell us?

How sensitive the quantity demanded for product is based on a change in the price.


The price of product X has gone up from $2 to $3. As a

result, the quantity demanded for product Y has gone up

from 40 to 80.

What is the XED?

Are these goods complements or substitutes?

Is this elastic or inelastic and what does this tell us?

XED = 2Substitutes

Elastic – as the price goes up for one good, the quantity demanded for another good will go up by

a greater percentage.


Your income increases by 3% which leads to demand for product Y to decrease from 300

to 270 units.What is the YED?

Is this product normal or inferior?Is it elastic or inelastic and what does that

mean?

YED = -3.3InferiorElastic


What are two determinants of elasticity of supply that are different

from demand?

Closeness of producer substitutes, unused capacity


Last year, the price for tuition at a state university increased by 14%. As result of the price hike, the university saw an 8% drop in student enrolment.

EVALUATE whether the university should raise prices, or lower prices next year if it would like to

generate more revenue?

PED = .57Increase Prices because it’s inelastic


The Econ

OlympicsSection 2.4

Market Failure

Negative Externalit

y

Positive Externalit

y

A Common Tragedy

Public Goods

Chuck Norris once participated in the running of the bulls. He walked.

Diagrams

Give an example of a market failure caused by a negative externality. Why is this considered a market

failure?

The recycling of computers leading to cancer in children. This is market failure because we don’t pay for this cost when purchasing or

supply a computer.


Provide four examples of different negative externalities we talked

about in class.

Noise pollution (car alarms), air pollution, second-hand smoke, plastic bags

polluting the seas, accidents from alcohol, poor housing


Provide three examples of different positive externalities we talked

about in class and explain why they are considered market failures.

Education, beautiful homes, vaccinations, public

transportation…society is benefiting without having to pay the cost.


Explain the idea of The Tragedy of the Commons and what the solution

to this tragedy often is.

Areas that we all share and nobody owns are often poorly taken care of and exploited. The

solution is to provide property rights to individuals or groups to take better care of

these resources.


Explain how we determine what a public good is, give an example, and

explain why the market won’t provide it.

Non-rivalrous and non-excludable. Street lights. Too many people would benefit without

paying. (Free riders.)


Look at the diagram to the left. Label the lines. Then explain what this

graph is showing.

This graph shows a negative externality. We pay a marginal private cost for a good or service, but not the marginal

social cost.


Price

Quantity Bought and Sold

£5

100

£12

£7

80

The Econ

OlympicsWild Card!

Yin Yang Billie JeanChuck Norris

Enrique Iglesias

Jessica Alba

William Shakespeare

Life is all about balance. Don’t work too much, but don’t just play life away. Don’t eat all sweets, but indulge from

time to time in a creamy, chocolate fudge dessert. Keeping in mind this idea of balance, answer the following question

while balancing yourself on your hands.

Scarcity is permanent and a shortage is temporary.

Total Pts. = 3 pts. Section 1

WILD CARD

What is the difference between scarcity and shortage?

One of Michael Jackson’s most popular songs was “Billie Jean.” In honor of him and his song, dance to the first

minute of Billie Jean. If your dancing is satisfactory, then you can answer the following question:

Total Pts. = 4 pts.Section 2.1WILD CARD

All else equal – to study the change on demand, we need to assume other things are the

same. To study how price affects demand, we need to assume income, population, etc. stay the

same.

What does Ceteris Paribus mean and why is it important in Economics?

It has been said that Chuck Norris could do 100 pushups with one hand, and memorize 100 pages of Economics at the same time. Using Chuck Norris’ strength and mental

acuity as inspiration, do 20 pushups on your desk and then answer the following question.


Explain the concept of “The Invisible Hand” in Economics.

There are no weapons of mass destruction in Iraq, Chuck Norris lives in Oklahoma.

The self-regulating nature of the market. Prices will eventually rise or fall to their correct levels naturally as

people make choices.

Enrique Iglesias is unquestionably the greatest bilingual singer of all time. After singing the first

30 seconds of his song “Dimelo” answer the following question:

Total Pts. = 3 pts.Section 1

WILD CARD

TraditionalMarketPlanned

What are the three types of economies we discussed, and some pros and cons of each one.

Jessica Alba has earned her fame by developing into one of the most skillful actresses of our time. Create a scene where one person in your group pretends to be Jessica

Alba. The scene must include some type of negative externality. After the scene, answer the following

question:

Explain the concept of a free rider and give an example.


Someone who benefits from others buying goods because those goods are non-excludable or non-rivalrous. (A roommate buying a couch.)

William Shakespeare had a gift for words, and if rap music had been around in the 16th century, there is no doubt he would’ve created some phatjamz. Since he is now food for

worms, your task is to write a rap about any aspect of Economics. Once your rap is finished, you and your group

must perform it and answer the following question:

Total Pts. = 5 pointsSection 2.2WILD CARD

What do the following elasticities tell us?

Ped = .8

Yed= - 1.9

Pes = 3.4

Xed = - .7

econ olympics

Business

section wild2

total utility graph

demand increases

cars inferior good

price ceiling

unattainable0 quantity

quantity utility0

income increases