Quantitative Methods for Economics Dr.

Katie Sauer

Questions for Section 2.2 Reading (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) 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 (math text) Write down the formula for point elasticity using derivatives.

What is the general form for functions with constant elasticity?

Questions for Ch 7 (math text) 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 (math text) 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.

Descriptive Statistics (ch 2 stats) Complete the following table by filling in the appropriate formulas. Add any notes that might help you use the formulas.

Raw Data Population Mean

Grouped Data

Sample Mean

Mid-Interval Value

Median

Mode

1st Quartile

2nd Quartile

3rd Quartile

Range

.. . .

Raw Data Variance

Grouped Data

Standard Deviation

InterQuartile Range Quartile Deviation

Write the formula for the Coefficient of Variation. What does it tell you?

Write the formula for Pearsons Coefficient of skewness. What does it tell you?

Explain how to construct a box plot.

Explain the grouping assumption.

What is a frequency distribution? How do you construct one?

What is a cumulative frequency graph (Ogive)? How do you construction one?

What is a weighted average?

Sampling Distributions for Means and Proportions (ch 6 stats) What is the difference between a statistic and a parameter?

What is a point estimator?

What does the notation

refer to?

What does the notation

refer to?

What does standard error of the mean refer to?

What is sampling error?

What does the Central Limit Theorem say?

What is a proportion?

How do you calculate the mean for a sample proportion?

How do you calculate the standard error for a sample proportion?

How do you do a sampling distribution of proportions?

How do you calculate the mean and standard error for sample proportions when the population proportion is unknown?

Explain the desirable properties of estimators.

Confidence Intervals for Means and Proportions (ch 7 stats) Write the formula for a (1-)(100%) confidence interval for :

In general terms, what *is* a confidence interval?

How do you find a confidence interval for n > 30 when is unknown?

Review the very useful chart on page 292.

What is a one-sided confidence interval?

How do you construct a one-sided confidence interval?

How do you construct a confidence interval for proportions?

Review the very useful chart on page 298.

What are the effects of , the level of confidence and n on the precision of the confidence interval?

How do you calculate the sample needed to yield a confidence interval of a given level of precision?

Write the expression for the distribution for the difference of 2 means.

Write the expression for the confidence interval for the difference of 2 means.

Write the expression for the distribution for the difference to 2 proportions.

Write the expression for the confidence interval for the difference of 2 proportions.

Review the very useful chart on page 308.

How do you interpret a confidence interval?

Tests of Hypothesis for Means and Proportions (ch 8 stats) What is a null hypothesis?

What assumption do we make about the null hypothesis?

How would you test a null hypothesis?

What is an alternative hypothesis?

What is a p-value?

What is a significance test?

What are the steps for a classical method hypothesis test?

How can you informally describe the t-statistic? Formally?

What is a Type I error?

What is the maximum probability of making a Type I error?

What is a Type II error?

What is the power of a test?

What is a one-sided test? Two-sided?

What are the steps for hypothesis testing?

How are Confidence Intervals and hypothesis tests related?

How do you conduct a hypothesis test for proportions?

How do you conduct a hypothesis test for the difference between means or proportions?

How do you conduct a pooled estimate of variance?

Inference from Small Samples (ch 9 stats) What is a t-distribution? When is it used?

How do you calculate the number of degrees of freedom?

How do you construct a confidence interval for n < 30 when is known and the population is normal?

How do you construct a confidence interval for n < 30 when is unknown?

What test statistic would you use for a small sample with unknown population standard deviation?

How do you construct a confidence interval and perform a hypothesis test for a difference of means from small, independent samples?

What is the formula for the pooled estimate of variance? When is it used?

What is an F-test? How do you perform one? When do you perform one?

What is a paired sample?

How do you construct a confidence interval and perform a hypothesis test for the difference in means from a paired sample?