Chapter 4: Elasticity of Demand

1) What is the price elasticity of demand and how is it measured? What are the three cases for the price elasticity of demand? Briefly define each. (10 pts)

2) What does a horizontal demand curve indicate about the price elasticity of demand? What factors determine the magnitude of the price elasticity of demand? (5 pts)

3) Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative. (5 pts)

Chapter 5: Efficiency and Equity

1)Define allocative efficiency, consumer surplus, and producer surplus? (5 pts)

2) Explain the difference between the "fair rules" and the "fair results" guidelines for competitive market fairness. (5 pts)

3) Explain the utilitarianism principle. How is it deficient? (5 pts)