Do you plan to take any more economics courses at UCSB? 1.Yes 2.No 3.Undecided.

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Presentation transcript:

Do you plan to take any more economics courses at UCSB? 1.Yes 2.No 3.Undecided

If the price elasticity of demand is 3, then the price elasticity of supply must be –1/3. 1.True 2.False

Increasing the penalties for selling cocaine is likely to 1.Shift the demand curve for cocaine up. 2.Shift the supply curve for cocaine up. 3.Shift the supply curve for cocaine down. 4.Shift the demand curve for cocaine down.

And on to our lecture…

The supply curve for marijuana is horizontal and demand elasticity is –1/2. If the government confiscates and burns 20% of the marijuana crop, the equilibrium amount of marijuana consumed will fall by 1. 40% % 3. 10%. 4.5% 5.0

Costs for producers increase by about 20 %. Price increases by about 20% % change in Quantity % change in Price =-1/2 %Change in Quantity= - 1/2*20= - 10 Quantity Price

Because of a new tax, the price of cigarettes rises by 20 percent. Consumption falls by 5 percent. What is the price elasticity of demand? /4 4.-1/2 5.+4

How will stiffer penalties for drug dealers affect the amount of money spent on drugs? 1.Decrease it if the demand curve slopes down 2.Decrease it only if demand is inelastic. 3.Increase it if demand is inelastic. 4.Increase it only if supply is elastic.

And back to our lecture… What’s making all that noise?