S. Klepper, Economics 73-100

Basis of demand curves, separate demand curves for different income levels

• Problem 1 on Problem Set 3

• Experiment 3

Elasticities of demand

• Predicting price and output changes using the price elasticity of demand

• Problems 2, 3, 4a, and 4b on Problem Set 3

• Youth drinking

• Effect of price changes on revenues/total expenditures based on the price elasticity of demand

• Problems 4c, 4d, and 5 on Problem Set 3

• Policy regarding the opiates

Nature of production in the short run

• Problem 1 on Problem Set 4

• Experiment 4

Nature of costs and their significance for supply

• Problems 3, 4, and 5 on Problem Set 4

• Experiment 4

Economic definition of cost, significance for supply

• Problem 2 on Problem Set 4

• Class review

Understand experiments and class applications

Do past exam questions

• Write out answers to selected problems, ask TA to review by Saturday

• Meet with TA by Monday to review answers

Attend Monday, November 5 and Tuesday, November 6 review sessions

• Monday, 7:30, Doherty 2315—questions regarding two past exams II in problem set book (brief answers also are in book)

• Tuesday, 7:30, Doherty 2315—general session on all but past exam questions

[43] 3. Consider the fourth experiment conducted in class concerning production. Suppose that an innovation were developed which reduced the total amount of labor required to produce each level of output by the same percentage. Assume that the price of labor remained at $1 per unit in rounds 1-3 and $10 per unit in rounds 4-6 and that it continued to cost $20 to play each round of the experiment regardless of the level of output produced in the round.

Which of the following correctly describe the effects of the innovation on the costs and profit-maximizing choices of producers, where all comparisons pertain to the situation after the innovation versus before the innovation? Mark true for correct statements and false for incorrect ones.