Questions to Lecture 2 – Market equilibrium and public sector

  1. What are the main market participants and what objectives do they pursue?
  2. Explain how money helped to solve the problem of coincidence of needs.
  3. Define demand.
  4. What does the law of demand say? Give an example of the exemption from this law.
  5. How would a demand curve look like in the situation, when a person is in a desperate need of a good and would pay anything for it? Why is such situation not very plausible (think about willingness vs. ability to pay)?
  6. Give an example on how tastes affect demand.
  7. Give an example on how change in price of a complementary good affects demand.
  8. Give an example on how change in price of a substitute good affects demand.
  9. With respect to the demand for the university enrollment, which of the following would cause a movement along and which a shift in the demand curve?
  10. Lower tuition
  11. More student loans
  12. Define supply
  13. What are the determinants of supply?
  14. Explain how the price adjustment works in the case of market surplus.
  15. Explain how the price adjustment works in the case of market shortage.
  16. What are the pros of opt-out vs. opt-in system of enrollment (use an example of retirement savings scheme)?
  17. Give an example of positive demand shock (other than on lecture). Show how this shift affects the equilibrium price and quantity.
  18. Give an example of negative supply shock (other than on lecture). Show how this shift affects the equilibrium price and quantity.
  19. Give an example of negative demand shock. Show how this shift affects the equilibrium price and quantity.
  20. Give an example of positive supply shock . Show how this shift affects the equilibrium price and quantity.
  21. What is the main difference between public and private good? Give an example of public good.
  22. Define a free rider.
  23. Why do we observe under-production of public good?
  24. Give an example of negative externality (other than on lecture). Why do we observe an overproduction of goods generating external costs?
  25. Give an example of positive externality (other than on lecture). Why do we observe an underproduction of goods generating external benefits?
  26. Describe why market power of a market participant may lead to non-optimal output mix.
  27. Give an example of natural monopoly from your country.
  28. What is the specific market-failure justification for government spending on
  29. Public universities
  30. Health care
  31. Highways
  32. Police
  33. How much of government expenditures is appropriate based on the principles of cost-benefit analysis
  34. What is the main idea behind public-choice theory