Economics unit 2

You as a producer, are trying to decide how to maximize your profits and decide what you can raise your price on verses what not to. Which product would be considered inelastic?

• You pizza can have a large increase in price and slight change in demand

• Your pizza can have a large change in price with a high change in demand

• You create the most delicious pizza ever, you can jack that price up, but alas, demand has plummeted as this is not Chic fil a.

• A massive change in demand results in a small change in price.

Let us assume you are a politician. Why would you argue in favor of a price ceiling?

• ew, politicians are disgusting roaches...shame on you. But you are trying to protect consumers so....

• encourage production to expand

• break up potential monopolies.

• increase the number of jobs.

Assume you own your own business. Based on these statements, when would you decide to raise the price of your product?

• when demand rises.

• when supply in the area reaches a certain point

• when you can find a cheap substitute

• when the cost of your inputs goes down

When a price ceiling is put in place on gas, long lines and happen because of what?

• there is a shortage because producers supply less.

• the different gas stations decrease price to increase competition.

• you decide to purchase a car that burns gas faster.

• gas producers lay off workers to increase efficiency

when a price ceiling is put in place, who benefits?

• Mr. B because I get to have this wonderful job teaching you punks.

• consumers

• producers

• the shadow government pulling the strings of society

Under what circumstance is the price of a good likely to rise?

• when demand increases, gotta make that $$$$.

• when a competitor makes a better product than you scrubs.

• It wont because you live in a engineered economy where all prices are set by the government.

• when the cost of raw materials decline.

Cereal and milk are considered what?

• breakfast

• substitutes

• complementary good (companion goods)

• neutral goods

when the government decides to set a price ceiling (price cap), what tends to happen?

• As a result of making less money, they produce less

• they decide to make more of the product to account for the loss in money

• There is a surplus

• the company becomes more profitable

why would you decide to choose a new product instead of your favorite one?

• the substitute is cheaper.

• The new one has cooler features, even if it is way more expensive.

• the substitute is less available

• I sold in bigger batches

In what way is productivity related to the price of goods?

• The more productive you are with resources, the more output, lower cost for consumers.

• The productive your resources, the more expensive it gets to produce and sell

• You produce lower quality goods, meaning people are less likely to buy your product

• Being more productive is a bad thing.