Economic Development

Question 1

Demand

Answer 1

Buyers - MArginal Benefit

Question 2

Supply

Answer 2

Sellers/ producers

Question 3

Shifters of Demand

Answer 3

Income, welfare economics, consumer surplus/buyer happiness

Question 4

SoD - Income

Answer 4

Normal Goods
- Income up, Demand Up
Income down, Demand Down
Examples: cars, restaurants meals, cotton in 1800’s -> slaves

Inferior Goods
- Income up, Demand down
Income down, Demand up
Example: ramen, spam, generics, education, wool in the 1800s

Question 5

SoD - Welfare economics

Answer 5

the study of how resource allocation affects the welfare of groups
Ex: Taxes, imports, abolishing slavery

Question 6

SoD - Consumer surplus

Answer 6

buyer happiness
CS = WTP - price paid by buyer
(MB)

WTP = willingness to pay
MB = marginal benefit

Question 7

Colonization

Answer 7

Spaniards looking for gold
British looking for natural resources and have a better economic system so they colonize quicker

Question 8

Virginia Company

Answer 8

• started in 1619 - deals with indentured servants
• Indentured servants signed a contract to become indentured servants to gain land and passage to colonies
• It was about ¾ of colonists
• Only about a 4 year debt, could own property, use court systems
  Dies out in early 1800’s

Question 9

Colonization

Answer 9

Spaniards looking for gold
British looking for natural resources and have a better economic system so they colonize quicker

Question 10

Virginia company

Answer 10

started in 1619 - deals with indentured servants
Indentured servants signed a contract to become indentured servants in order to gain land and passage to colonies
It was about ¾ of colonists
Only about a 4 year debt, could own property, use court systems
Dies out in early 1800’s

Question 11

Francis Cabot Lowell builds a textile mill w/ power loom. Demand for women workers increases. What happens in the market for female labor to wage, and employment - who is better/worse?

Answer 11

Question 12

Money Market Graph

Answer 12

Verticle Supply, decreasing slope demand

Question 13

Suppose that new discoveries of valuable resources in America increased the demand for indentured servants. Holding cost of the voyage and other things the same, newly immigrating indentured servants’ labor terms

Answer 13

Decrease

Question 14

The Sugar Act of 1764 placed new excise taxes on wine in the colonies. In the market for wine, this act caused consumer surplus to

Answer 14

decrease, and producer surplus to decrease.

Question 15

During the early 1800s, the construction of canals caused the price that sellers received for goods to

Answer 15

increase, and total surplus in these markets to increase

Question 16

During the first period of colonization into America, most indentured servants were
a. male slaves
b. female slaves
c. children slaves
d. none of the above

Answer 16

None of the Above!

Question 17

During the American Revolutionary War, the British counterfeited large numbers of continents. All else equal, this caused the equilibrium price-level for Continentals to

Answer 17

Increase, and the equilibrium quantity of Continentals to increase.

Question 18

Cotton is a normal good. All else equal, when the economy went into recessionary periods during the early 1800s, the demand for cotton

Answer 18

decreased, decreasing producer surplus in the market for cotton

Question 19

Normal Good

Answer 19

income rise, demand rises
income falls, demand falls

Question 20

Producer surplus

Answer 20

The happiness of the seller = Price received for each unit minus
the marginal cost

MC = supply

Question 21

Consumer surplus

Answer 21

Willingness to pay minus price paid
WTP = demand curve

Question 22

Excise tax

Answer 22

• buyers and sellers share that cost

Question 23

Shipping and handling

Answer 23

• buyers and sellers share the cost

Question 24

Anaconda plan and impact
- price of cotton
- production
- economic welfare (PS)
- CS
- Total Surplus

Answer 24

Blocks exports in the south and brings down the price of cotton, production decreases

Economic welfare of plantation owners (PS) decreases

Domestic consumption of cotton rises so southern textile mills benefit - CS increases

Total surplus decreases

Demand for slaves decreases

Question 25

Anaconda plan blocks southern imports

Answer 25

Goes from free trade to no international trade

Price of guns increase
Domestic Production increases
Producer surplus increases
Domestic consumption decrease
Consumer surplus decrease
Total Surplus decreases
Demand for labor increased