Economic Review. Situation One Steven is paid every Wednesday. He earns a net pay of 225 dollars a week. His car payment is 200, rent, 500, groceries.

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Presentation transcript:

Economic Review

Situation One Steven is paid every Wednesday. He earns a net pay of 225 dollars a week. His car payment is 200, rent, 500, groceries 100, and gas 50 dollars. He wants to get a smart phone with a plan that costs 50 dollars a month but he also wants to get cable from Time Warner that costs 50 dollars. How much disposable income is left? How much discretionary income is left? The above situation demonstrates which fundamental economic principle? In order to make a smart decision, what should Steven do?

Graph One Fill in and explain, in detail, what is occurring in each portion and why.

Situation Two In order to compete with Redbox, Blockbuster is rolling out a kiosk based rental chain. They priced new rental DVD’s at 2.50 a night. Redbox rents all DVD’s at a dollar a night. Based on the law of supply, how many are Blockbuster willing to sale at that price? Based on the law of demand, how many will consumers be willing to buy? Based on the interaction of supply and demand, what will result from this price? How might a change in price impact the interaction of supply and demand? In the above situation, what are the roles of price, competition, and profit.

Graph Two Identify the equilibrium price. If suppliers charged 4 dollars, what would occur? If they charged two dollars, what would occur? What type of products could shift the curves? What is the degree of the shift called?

Situation Three Nation A has nationalized (made it public ownership) all financial institutions, steel industries, and transportation industries but allow small businesses and private industries that are not considered vital to national security. Nation B has passed numerous anti-trust laws aimed at maintaining healthy competition. Nation C only allows small business to be privately owned. There are no corporations or any form of private investment. – Place each of the nations on a continuum and explain there positions. – Identify the three production questions and explain how each nation would answer these. Make sure you justify your answers.

Graph Two What is the graph analyzing? Examine the period between Jan-07 and the peak in between Jan-08 and Jan-09. What is occurring? Discuss the different tools and method the Federal Reserve could use to change this. Now look at the drop off after the peak. What is occurring? How might the Federal Reserve react to this. Overall, how does the graph reflect the role of the Federal Reserve in our economy.