Chapter 5 - Test Part 2 - (AP MICROECONOMICS) - Sarah PDF

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Chapter 5 - Test Part 2 (AP MICROECONOMICS) - Written answers. NO plagiarism. Very complete answers....

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AP® Microeconomics | Graded Assignment | Chapter 5 Short Answer and Essay

Name: Sarah Oberto Monasterios Date: March 26th, 2021

Graded Assignment Chapter 5 Short Answer and Essay Subjective Short Answer Complete this teacher-scored portion of the Unit Test and submit it to your teacher by the due date for full credit. Spend about ten minutes on each question. Take time to think about your answer before you begin writing. (Score for Question 1: _____ of 2 points)

1. Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future? Answer:

Based on the information given, I would expect the price elasticity of demand to be more inelastic immediately after the price increase.

(Score for Question 2: _____ of 2 points)

2. Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain. Answer:

In order to answer this question it is important to analyse the context of the hypothetical situation. To begin with, it is known that oranges are a necessary input to produce orange juice, and this means that increasing the price of oranges will consequently reduce the supply of orange juice. The total revenue may increase or decrease when the price of orange juice rises. In this case, if the demand for orange juice is elastic, the total revenue will fall/decrease; however, if the demand for orange juice is inelastic, the total revenue will rise/increase. Essay Spend about thirty minutes on the essay question. Take time to think about your answer before you begin writing. You may want to begin with an outline to organize your ideas and to make sure you answer all parts of the essay. (Score for Question 3: _____ of 10 points)

3. Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain. Answer: © 2020 K12 Inc. All rights reserved. Copying or distributing without K12’s written consent is prohibited.

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AP® Microeconomics | Graded Assignment | Chapter 5 Short Answer and Essay

Before deciding whether the price should be increased or decreased, there is a series of factors that need to be considered. To begin with, demand can be elastic or inelastic. The elasticity of demand refers to the extent to which demand responds to a drift in another economic factor, including the price. So, elasticity is able to measure how the demand shifts when another economic factor, such as the price, changes. When the demand is inelastic, it means that the fluctuating demand is not related to an economic factor. Using this information we can tackle the hypothetical situation that I am the manager of a baseball stadium and want to increase the revenue in order to pay the salary for a star player. The answer to whether the price of the tickets should increase or decrease actually depends on whether demand is elastic or inelastic. If demand is inelastic, then I should raise the price to increase total revenue. On the other hand, if demand is elastic, then I should lower the price to increase total revenue and pay the salary of the star player.

© 2020 K12 Inc. All rights reserved. Copying or distributing without K12’s written consent is prohibited.

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