Elasticity provides a technique for estimating the response of one variable to changes in some other variable and has numerous applications in economics. Price elasticity of demand measures _____________________________________  

Formula Sheet   HPR = (PS – PB+CF)/PB APR = HPR x 365/t where t=# of days held 1 + EAR = (1 + HPR)n where n is periods per year (or 365/t) 1 + EAR = eAPR rcc = ln(1 + EAR) Arithmetic average = HPRavg =

Based on the above figure, the price elasticity of demand at a point midway between A and B is ______________,  indicating that the demand for this good in its current price range is _____.

  An individual or country that has a comparative advantage in the production of one good  

An investor chooses to invest 85% of her wealth in a risky asset P with an expected rate of return of 18% and a standard deviation of 26%, and she puts 15% in a riskless Treasury bill that pays 3%. Let C denote this complete portfolio.   (a) Compute the expected rate of return and standard deviation of portfolio C. (6 points) (b) Draw the Capital Allocation Line (CAL) for this investor. Clearly label the points corresponding to the T-bill, asset P and portfolio C. (5 points) (c) What is the slope of the Capital Allocation Line (CAL)?  What does this slope represent? (5 points) (d) How low would the risk aversion of an investor need to be for them to allocate more than 100% of their wealth to P?  Find the risk aversion level of the investor given her complete portfolio decision above. (5 points)

If, as the price of good A decreases by 20%, the quantity demanded of good B increases by 10%, then goods A and B are likely to be _________.

According to the original Constitution, senators were appointed by state governors. 

  Average Fixed Cost (AFC): Total fixed cost (TFC) divided by quantity of output  Average Variable Cost (AVC): Total variable cost (TVC) divided by quantity of output Average Total Cost (ATC): Total cost (TC) divided by quantity of output MC indicates marginal cost.  Based on the above plot (c) (1)_____________ continuously declines as the quantity of output rises, because (2)____________ is constant. 

  When an economy experiences inflation, the money  

  The cost of producing a bushel of wheat in Country A is $5, and the price at which Country A sells a bushel of wheat abroad is $4. This is an example of