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Quantitative Methods for Economics Dr.

Katie Sauer

Reading Questions for Teresa Bradleys Essential Mathematics for Economics and Business Chapters 2, 3, 4, 6, 7, 8 _____________________________________________________________________ Questions for Section 2.2 Reading 1. What is the difference between a static and dynamic model?

2. What is the difference between a physical and an abstract model?

3. What is the difference between a deterministic and a stochastic model?

4. What are the 4 basic steps to mathematical modeling?

Questions for Section 2.3 Reading 1. A general demand function is written as Q = f(P, Y, Ps, Pc, Ta, A). We often simplify it to Q=f(P). What assumptions are we making when we do this?

2. When we write demand as Q=f(P), which variable is the dependent variable and which is the independent variable?

3. Most of the time in economics, we plot quantity on the horizontal axis and price on the vertical axis. Explain what this has to do with the inverse demand function.

4. For a linear demand function, the Law of Demand implies that what will be true about the slope?

5. For a linear supply function, the Law of Supply implies that what will be true about the slope?

6. For the demand function of P = 200 2Q, if quantity demanded increases by 1 unit, by how many units did price change?

7. For the supply function of P = 20 + 0.33Q, if quantity supplied increases by 1 unit, by how many units did price change?

Questions for Section 3.1 Reading 1. What are two methods for solving two equations and two unknowns?

2. How would you know if a system of equations has no solution?

3. How would you know if a system of equations has infinitely many solutions?

______________________________________________________________________ Questions for Section 3.2 Reading 1. Write the demand equation for good x if good x and good y are substitutes.

2. Write the demand equation for good x if good x and good y are complements.

3. How does a per unit tax affect Supply, Demand, and market equilibrium?

4. How does a per unit subsidy affect Supply, Demand, and market equilibrium?

5. What is the formula for calculating the fraction of the tax/subsidy that a consumer pays/receives?

6. What is the formula for calculating the fraction of the tax/subsidy the producer pays/receives?

7. What do we mean when we say a firm is breaking even?

_______________________________________________________________________ Questions for Section 3.3 Reading 1. Explain what consumer surplus is.

2. Graphically and algebraically, how can we measure consumer surplus?

3. Explain what producer surplus is.

4. Graphically and algebraically, how can we measure producer surplus?

5. Explain what total surplus is.

6. Graphically and algebraically, how can we measure total surplus?

_____________________________________________________________________ Questions for Section 3.4 Reading 1. Under what conditions does equilibrium national income occur?

2. What is the equation for aggregate expenditure?

3. What are the steps for algebraically finding the equilibrium level of national income?

4. How would you graphically solve for the equilibrium level of national income?

Questions for Section 4.1 Reading 1. If an equation is of the form ax2 + bx + c = 0, then what is the solution?

2. What is the constraint on a in a quadratic equation?

3. How many solutions will a quadratic equation always have?

4. Explain what an imaginary number is.

5. If you wanted to translate the quadratic equation vertically up by 5 units, how would you manipulate the original equation? Vertically down by 7 units?

6. If you wanted to translate the quadratic equation horizontally to the right by 4 units, how would you manipulate the original equation? Horizontally left by 2 units?

7. What are the 2 general properties of cubic functions?

Questions for Section 4.2 Reading 1. If you want to multiply numbers with the same base, how do you treat the exponents?

2. If want to divide numbers with the same base, how do you treat the exponents?

3. If you want to raise an exponential to a power, what do you do?

_____________________________________________________________________ Questions for Section 4.3 Reading 1. Explain how to convert an exponent into a log.

2. How do you solve an equation using the log rules?

____________________________________________________________________ Questions for Section 4.4 Reading 1. Sketch the graph of the rectangular hyperbola, y = 1/x.

2. When a hyperbola has the form: y = a/ (bx + c), how is the graph of y=1/x changed?

Questions for Section 6.1 Reading Write down all the different notations that indicate the derivative of y = f(x).

Write down the power rule for differentiation.

Write down the three working rules for differentiating sums and differences.

How do you take a second derivative? Third derivative?

How do you determine if a function is increasing or decreasing?

How do you determine if the slope is increasing or decreasing?

____________________________________________________________________ Questions for Section 6.3 Reading What does optimization mean?

At a turning point, the slope of a function must equal what value?

If the slope of a function equals zero, does that mean it is a turning point?

Write down the steps for the max/min method.

Questions for Section 6.5 Reading Explain curvature and its application in economics.

On a first-quadrant graph, illustrate concave up/down and convex/concave to the origin.

What is an inflection point and how do you locate one?

Write down the relationships between average cost and marginal cost.

____________________________________________________________________ Questions for Section 6.6 Reading Write down the exponential and natural log rules for differentiation.

Write down the chain rule for differentiation.

Write down the product and quotient rules for differentiation. ____________________________________________________________________ Questions for Section 6.7 Reading Write down the formula for point elasticity using derivatives.

What is the general form for functions with constant elasticity?

Questions for Ch 7 Reading What is a partial derivative? How do you take one? What is its notation?

What is a straight second-order partial derivative and what is a mixed second-order partial derivative? Write some examples of the notation for each.

Write the general form of the Cobb-Douglas production function.

Work through tables 7.4 and 7.5. These will be very handy references for you in future classes. In looking at a Cobb-Douglas production function, how can you determine what type of returns to scale it exhibits?

Explain the long and short run laws of production.

Write the general formulas for finding price elasticity of demand, income elasticity of demand and cross-price elasticity of demand.

Write the general formulas for finding the partial elasticities of labor and capital. How are these elasticites interpreted?

Write out the steps for optimizing functions with two variables.

What do we mean by constrained optimization?

Write out the general form for the Lagrangian.

Questions for Ch 8 Reading What is integration?

Write down the notation for taking an integral of a function.

Write the power rule for integration.

Write down the exception to the power rule.

Write down the rule for integrating a constant.

Write down the working rules for integration.

Write down the rule for integrating a function with base e.

Write down the rules for taking a definite integral.

Write down the general expression for finding consumer surplus using integration.

Write down the general expression for finding producer surplus using integration.

Write down the general expression for finding the area between two curves.

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