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# AP MACROECONOMICS UNIT 1 QUESTIONS CHAPTERS 2, 3 AND 20

Ch 20: 1. Graph the demand data in the following table for each of the 4 possible \$1 price changes using the midpoints formula for Ed to determine price elasticity of demand:

Product Price
\$5 4 3 2 1

Quantity demanded
1 2 3 4 5

What is the relationship between the slope of a curve and its elasticity. Explain why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment.

2. How would the following changes in price affect total revenue: price falls and demand is inelastic. Price rises and demand is elastic. Price falls and demand is of unit elasticity. 3. Identify the best formula for elasticity? Beachfront resorts have an inelastic supply and automobiles have an elastic supply. Suppose that a rise in population doubles the demand for both products(in other words, quanitity demanded at each price level is twice what it was). a. What happens to the equilibrium price and quantity in each market. b. Which product experiences a larger change in price. c. Which product experiences a larger change in quantity. 16 .Suppose the cross elasticity of demand for products A and B is +3.6 and for products C and D is 5.4. What can you conclude about how products A and B are related? Products C and D?

17. The income elasticities of demand for movies, dental services, and clothing have been estimated to be +3.4, +1.0, and +0.5 respectively. Interpret these coefficients. What does it mean if the income elasticity coefficient is negative?

18. Define price ceiling and price floor. Does either benefit the consumer( explain)?