I am doing homework and need to verify my answers. Please give a brief descripti
ID: 1249561 • Letter: I
Question
I am doing homework and need to verify my answers. Please give a brief description on why you choose false. Thanks :-)True/False (3 pts each)
Indicate whether the statement is true or false.
____ 1. Suppose that in one hour Dewey can produce either 10 bushels of corn or 20 yards of cloth. Then Dewey’s opportunity cost of producing one bushel of corn is 1/2 yard of cloth.
____ 2. The demand curve is the upward-sloping line relating price and quantity demanded.
____ 3. A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in quantity supplied.
____ 4. If the current year CPI is 90, then the price level has decreased 10 percent since the base year.
Explanation / Answer
1. False
Oppurtunity cost is how much you are willing to give up for the next unit. You want to find the ratio of corn to cloth and cloth to corn.
2 cloths= 1 corn
1/2 corn=1 cloths
You are willing to give up 2 cloths to produce 1 bushel of corn. You are willing to give up 1/2 bushel for 1 cloth. So Dewey is producing 1 bushel of corn is 2 cloths.
2. False
Demand curve is downward sloping. Price is on the vertical axis (Y) and Quantity Demanded is on the horizontal axis (X). Downward sloping means it has a negative slope. Upward sloping means it has a positive slope. If you know how the demand curve looks like. Chose some points. Apply the formula Y2-Y1/X2-X1. If you randomly select two quantity demanded points, you will get a negative slope.
3.False
A movement along the supply curve is called a change in quantity supplied. That is, if you move along the same supply curve you are only changing the amount of quantity with the new price level. The ratio is going to be the same and you are not going to be better off or worse off in terms of money. A shift in the supply curve can go either down or up and is not a movement. It is a seperate and new supply line. If the supply is shifitng left or down, there is less supply due to negative aspects like weather, technology, price level.... A Shift to the right is more supply caused by increase in productivity, new technology, good weather....
4. True.
Assuming base year 1 is 100 as in all cases. CPI= cost of base year quantiteis at crrent prices / cpst of base year quantites at base year prices. Well they calculated the CPI for you. That is 90. There are two typed of measures of the price level. That is implicit GDP deflator and Consumer price index. Therefore 100-90 = 10 and 100 x .10 = 10%
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