Homework #8

The homework assignment (Homework #8) handed out in class on Wednesday has a due date of October 24. This assignment is actually due Friday, October 26. (It was prepared for distribution on Monday the 22nd but since insufficient material was covered it was withheld until the material was covered on Wednesday.)

I hope there is no confusion.

JJ

Distribution of test 2 scores and comment on midterm grades

Here are the descriptive statistics from the second test:

average: 23.60 out of 40 (approx 59.01%)
median: 23.5 (58.75%)
mode: 22. 5 (56.25%)
stdev: 4.87 (12.16%)

The curve:

The mean was pretty low. I guess it was a tough long test. The following curve should give you an idea of the quality of your work (number of scores in each range is in parentheses):

A: 28.5+ (14)
B: 24 - 28 (26)
C: 18.5 - 23.5 (32)
D: 13.5 - 18 (8)
F: 13 and below (3)


Midterm grades:

In accordance with University policy, a midterm grade must be reported for those with midterm performance of D or lower. The red number on your test results page is your weighted average of points to date. Total number of points at the midterm, including the results of the second test, and only including 3 participation credit points (due to in-class exercises), is a total of 49. You should take your points and divide by 49 to put it into percentage terms.

The overall class average to date is 74.11%, a median score of 74.36%, and a standard deviation of 9.55%

The following grade scale is used to determine midterm grades:

A: 83.5%+
B: 74% - 83.49%
C: 63% - 73.99%
D: 50% - 62.99%
F: below 50%

Answer Key to Study Questions for Test #2

Here is the answer key to the sample multiple choice problems. Please keep in mind that these problems come from previous tests. There may be a few that cover some items not discussed in class, but they should be items covered in the readings.

1-A, 2-C, 3-B, 4-C,
5-D, 6-D, 7-B, 8-D, 9-B, 10-C, 11-A,
12-A, 13-B, 14-B,
15-B, 16-A, 17-D, 18-C, 19-B, 20-C,
21-C, 22-D, 23-C, 24-D, 25-A, 26-C, 27-D, 28-C,
29-A, 30-D, 31-B, 32-A, 33-B, 34-B,
35-B, 36-B, 37-B, 38-A,
39-D, 40-D*
41-B, 42-B, 43-C, 44-C, 45-A, 46-D, 47-C,
48-B, 49-D, 50-D, 51-A, 52-B, 53-C, 54-B,
55-C

comments:

40: This is a tricky one and I regret its trickiness. By looking at the diagram in Panel A, the supply is relatively elastic, compared to the demand. So the consumers pick up the larger share of the tax burden. However, (A, buyers) is not an option. But panel D shows supply being relatively more elastic than demand, which would satisfy the conditions of the set up of the problem, along with the buyers incurring a larger share of the tax burden.

A terminology note: item 20 refers to the "incidence" of the tax as in reality, who has to pay. This is the same as the burden of the tax. One thing that is important to keep in mind is that all taxes are shiftable. So when an excise tax is levied on the seller of a good, some of it (depending on the elasticity) gets passed on to the consumer. But the seller still bears some of the burden. That burden is usually in the form of lost sales due to the higher prices people have to pay.

So it may seem that when firms are taxed they just "pass it on to the consumer". This is only the case when demand is quite inelastic. So indeed, it may seem that taxes are passed to the consumer but also be aware, they can only really tax goods where that demand is not very elastic. Otherwise taxing the good will not only dramatically decrease sales but also not generate much tax revenue. So maybe we do get taxes passed on to us. But certainly our behavior limits those things that can actually be taxed.

Let me know (jjulian@iup.edu or CinciDood on AIM) if there are any errors on this key. And check back in case any corrections are made.

JJ

I hope it wasn't a complete bust

Hey folks,

Sorry about the poor learning conditions in Keith Hall today. I thought the jackhammer would end. Of course it stopped right after class. If I knew it would have been like that all class I would have cut all of our losses.

Anyway, I'll try to make it up to you somehow. And I've formally let the powers that be in the administration know that the working/learning conditions today were absolutely unacceptable.

Jack

Calculating Income Elasticity

Sorry we didn't get to calculations on income elasticity, but when you compare it to price elasticity it is pretty similar.

I have placed a document on the I-drive entitled "Calculating Income Elasticity". It contains the information above plus a few example calculations.

Good luck.