Market

a) How does the market demand for a good depend on its own price, the price of other goods and income?

b) How are the elasticities of demand calculated? What does price elasticity tell us about how consumer spending on a good changes when its price changes? What factors does price elasticity of demand depend on?

c) How is market equilibrium derived?

d) How is the equilibrium price and quantity affected by changes in market demand and supply?

e) How are the welfare properties of market equilibrium calculated?

f) How is the price paid by consumers, the price received by producers and the output traded affected by a per unit tax imposed either on the buyer or the seller? How are the answers affected by the elasticities of demand and supply (i.e., slopes of inverse demand and supply curves)?

Consumer Behaviour

a) How are preferences modelled?

b) How is a budget constraint drawn and derived?

c) Given preferences (an utility function) and a budget constraint, how are demand functions derived? Pay particular attention to utility functions such as U=x+y orU=xy or U=ax+by

d) What are the substitution and income effects of a price change? How are they calculated?

Producer Behaviour

a) Given technology (a production function) and input prices (w and r), how is the cost minimising input bundle for a producer derived in the long-run?

b) Given the cost minimising input bundle, how are the cost functions (TC, MC, AC, AVC) derived in the short-run/long-run?