Micro Ecom Wa 1

Written Assignment 1

Answer all of the following questions. Title your assignment "Written Assignment 1," unless your mentor directs otherwise. This assignment covers text chapters 1 through 6.

1. Define scarcity. Provide examples of goods that are not scarce.

A) Scarcity is defined as the limited nature of society’s resources. Some examples of non-scarce goods are: air, sea water, and rocks.

2. How does Adam Smith's concept of the invisible hand explain why markets move toward equilibrium? Do market participants need to know about the invisible hand for it to function?

B) Adam Smith’s concept of the invisible hand explains why markets move toward equilibrium because it allows consumers to choose freely what to buy and allows producers to choose freely what to sell, and how to produce it. The market will settle on a product distribution and prices that are beneficial to all the individual members of a community, allowing quantity supplied equaling quantity demanded. It is important for market participants to know how the “invisible hand” functions so they can enrich themselves by understanding how self interest regulates the markets supply and demand.

3. Use the following demand curve to answer the questions that follow.

E

a. How would point A be represented as an ordered (x,y) pair?

C) Point A is represented as ordered pair ( Quantity 20 / price, $24)

b. What does this curve show?

D) This curve shows the demand on a downward slope, indicating that a higher price reduces quantity.

c. Does this curve show a positive or negative correlation between price and quantity?

E) This curve shows a negative correlation between price and quantity because they are moving in opposite directions.

d. Compute the slope of D1 between points A and C.

F) Slope of D1 between points A and C = - 25

e. What is the slope of D1 between points C and E? Why would you not have...