ECONUSA Telecourse
Assignment #1
50 points
INSTRUCTIONS: Answer all of the questions below. You must label each graph. Always graph quantity on the horizontal axis. This assignment is easier to understand if you use graph paper.
1. The following is the production possibilities table for war goods and civilian goods: (10 points)
Product Production
Alternatives Wheat (million
tons) Missiles
a. Draw these data graphically, with quantity of wheat on the vertical axis and quantity of missiles on the horizontal axis.
b. If you are at point A, how much wheat can be gained from giving up 1 missile?
c. If you are at point D, how much wheat can be gained from giving up missile?
d. Suppose a new technology was developed allowing wheat production to increase using the same resources but had no application to missile production. Illustrate on the above graph how we would represent this change in production possibilities.
every warship
launched, every rocket
fired a theft from those
who hunger and are not fed, those who are cold
and not clothed. This world in arms
is not spending money alone. It is spending the
sweat of its laborers, the genius of its
scientists, the hopes of its
children ... This is not a way
of life at all in any true sense. Under the cloud of
threatening war, it is humanity
hanging from a cross of iron.
Every
gun that is made,
2a. Plot the data in the following table on a graph, with the price on the Vertical axis and quantity sold on the horizontal axis. (6 points)
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b. Which variable is the independent variable and which is the dependent variable?
c. Is this a direct (or positive) relationship or an inverse (or negative) relationship?
d. What is the slope between point A and point B?
e. What is the slope between point D and point E?
f. Interpret the economic meaning of the slope.
3. Graph each of the relationships listed below and state whether each is either a direct (or positive) or inverse (or negative) relationship. (4 points)
a. the price of cars and the number of cars consumers are willing to buy average
b. inches of rainfall in a day (from 0 to 10) and the number of golfers on the golf course
c. average summer temperatures and the number of air conditioners purchased
d. teachers salaries and the number of students enrolled as education majors
4. The data below is the Gasoline Market in the U.S.: (5 points)
Price Quantity Supplied (Mill. barrels)
Demanded Quantity (Mill. barrels)
1.00 30 240 1.50 70 200 2.00 110 160 2.50 150 120 3.00 190 80
a. Graph the Supply and Demand curves in the market for gasoline.
b. What is the initial equilibrium price and quantity?
5. For each of the following situations redraw both the initial Supply and Demand curves from question #4 above. Illustrate how the following changes are properly represented including any new equilibria. Indicate whether there is an increase or decrease in Demand or Supply. Be sure to proper label al axes, lines equilibria, and movements. (15 points)
a. War in the Middle East disrupts crude oil output
b. A new technology allows all internal combustion vehicles (i.e. automobiles) to get a minimum of 50 miles per gallon of gasoline.
c. In response to high gasoline prices consumers purchase trade-in their large inefficient vehicles and buy vehicles that run on alternative fuels, such as propane, gasohol, gasoline-electric hybrid engines and fuel cells.
d. The government removes all environmental regulations relating to crude oil extraction, refining and transportation.
e. The government releases its excess strategic reserves of gasoline to the market.
