Class: PAF-9130

1- Producer Behavior and the Supply Curve:

a- Define following concepts: 1) Technology 2) the law of diminishing marginal product 3) opportunity cost.

b- Why does a firm's supply curve have a positive slope? Explain.

c- How does a decrease in the world price of oil affect the supply curve of the industries that use oil as an input? Explain and use supply diagram to show your answer.

d- How does a decrease in the world price of oil affect the supply curve of oil producers in Texas? Explain and use supply diagram to show your answer.

f- How does adoption of a new technology affect producers' total revenue and profit? Your answer should be based on graphical analysis and the comparison of producer surplus and revenue before and after technological innovation. To make things simple, assume the output price is fixed at a hypothetical level.

3-[Consumer Behavior:

We are interested in the causal relationship between an individual's income (denoted by I) and her demand for public transit (indicated by Qd). Let's refer to this relationship as the "Income Curve."

a- What factors we need to hold constant to be able to draw the causal relationship between I and Qd d in a two-dimensional space in which the vertical axis represents income (I), and the horizontal axis represents Qd?

b- Holding those factors constant, what do you expect to see? (A downward sloping line or an upward sloping line?) Explain and illustrate your answer in the space of I and Qd.

c- Assume that cars become more expensive. How does the income curve is going to change? Explain and illustrate your answer in the space of I and Qd.

d- How does the fear of infection because of the current pandemic affect the income curve? Explain and illustrate your answer in the space of I and Qd.