Do with the econ exam just two days away, many students out there are wondering what to expect on the new higher level paper 3, the ldquo quantitative methods rdquo paper. I put this post together to share my own understanding of all the calculations students may be asked to do on this section of the exam. First, let rsquo s review the command terms you can expect to encounter on hl paper 3, and look at what is expected of students in questions of each type. command terms to expect on paper 3: calculate: ldquo obtain a numerical answer showing the relevant stages in the working. Rdquo derive: ldquo manipulate a mathematical relationship to give a new equation or relationship.

Rdquo draw: ldquo represent by means of a labelled, accurate diagram or graph, using a pencil. Graphs should have points correctly plotted if appropriate and joined in a straight line or smooth curve. Rdquo show that: ldquo obtain the required result possibly using information given without the formality of proof. Ldquo show that rdquo questions do not generally require the use of a calculator. Rdquo sketch: ldquo represent by means of a diagram or graph labelled as appropriate. The sketch should give a general idea of the required shape or relationship, and should include relevant features. Rdquo solve: ldquo obtain the answer s using algebraic and/or numerical and/or graphical methods.

Identify the slope of the demand curve as the slope of the demand function qd a ndash bp, that is ndash b the coefficient of p. Outline why, if the ldquo a rdquo term changes, there will be a shift of the demand curve. Identify the slope of the supply curve as the slope of the supply function qs c + dp, that is d the coefficient of p. Outline why, if the ldquo c rdquo term changes, there will be a shift of the supply curve. Calculate the equilibrium price and equilibrium quantity from linear demand and supply functions. how to: set the demand and supply equations equal to one another and solve for p. Once you know the equilibrium price, plug it into either equation to find the quantity. 2.

Plot demand and supply curves from linear functions, and identify the equilibrium price and equilibrium quantity. how to: there will only be an excess demand or supply if the question asks how a price other than the equilibrium would affect the market. Calculate ped between two designated points on a demand curve using the ped equation above. Calculate xed using the following equation: xed % change in qd of good x% change in price of good y 4. Calculate yed using the following equation: yed % change in qd% change in income 5. Calculate pes using the following equation: pes % change in qs% change in price 1. Plot demand and supply curves for a product from linear functions and then illustrate the effects of a specific tax.

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Calculate the effects of the imposition of a specific tax on the market on price, quantity, consumer expenditure, producer revenue, government revenue, consumer surplus and producer surplus . So to caclulate the effect of the tax in a supply equation you must subtract the amount of the tax from the price the seller receives. for example: assume the supply of pencils is represented by qs 10 + 3p, and a $2 per unit tax is places on pencils. Graphically, the supply curve has shifted leftwards by 6 units, or ldquo upwards rdquo by $2. 1.

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Plot demand and supply curves for a product from linear functions and then illustrate and/or calculate the effects of the provision of a subsidy on the market on price, quantity, consumer expenditure, producer revenue, government expenditure, consumer surplus and producer surplus. It is a payment to the seller above what consumers pay, so it rsquo s added to the price in the supply equation. assume pencil producers receive a $2 subsidy per pencil. Calculate possible effects from the price ceiling diagram, including the resulting shortage and the change in consumer expenditure which is equal to the change in firm revenue.

Calculate possible effects from the price floor diagram, including the resulting surplus, the change in consumer expenditure, the change in producer revenue, and government expenditure to purchase the surplus. how to: simply plug the price floor or ceiling into the demand and supply equations to find the quantities that would be supplied and demanded. If there rsquo s an effective price floor, the qs should be greater than the qd, meaning there rsquo s a surplus. If there rsquo s a price ceiling, qd should be greater than qs, meaning there rsquo s a shortage. 1. Calculate total, average and marginal product from a set of data and/or diagrams. how to: total product is the output of workers as the number of workers increases. average product is the ldquo output per worker rdquo tp/ of workers marginal product is the ldquo output of the last worker rdquo change in total product / change in the number of workers. 2.

Total variable costs, total costs, average fixed costs, average variable costs, average total costs and marginal costs from a set of data and/or diagrams. It is the firm rsquo s total cost when output 0. tvc increases as output increase, at first at a decreasing rate due to increasing returns , and then at an increasing rate due to diminishing marginal returns . tc tvc + tfc. If you know the firm rsquo s fixed costs and its variable costs, tc can easily be calculated. afc tfc / q of output. Graphically, it is the distance between avc and atc. avc tvc / quantity of output. Avc falls at first due to increasing returns and then increases due to diminishing returns.

Mc and avc should intersect at the lowest point of avc atc afc + avc, or tc / quantity of output. Atc lies above the avc curve since it includes the average fixed costs , and will intersect mc at its lowest pont. mc the change in tc / the change in output. Mc sloped down when a firm rsquo s workers experience increasing returns and upwards once the firm experiences diminishing marginal returns. 1. how to: total revenue tr price x quantity. average revenue ar is simply the price of the good.

The demand curve can be labelled ldquo d ar p rdquo to help you remember this. marginal revenue mr the change in total revenue divided by the change in quantity. For a pc firm, mr is constant and equal to the market price since the firm is a price taker and can sell additional units for the same price. But for an imperfectly competitive firm, mr is lower than price beyond the first unit of output, since the firm must lower its price to sell additional units of output. Mr fall twice as steeply as the d ar p curve in an imperfect competitor diagram. 1. Find the per unit profit p atc and multiply it by the quantity of output q. if you are given total revenue tr and total cost tc data, than economic profit tr tc. if atc gt p or if tc gt tr, then the firm rsquo s profit is negative, and it is earning losses. 1. Calculate the short run shutdown price and the breakeven price from a set of data how to: a firm should shut down if the price in the market is lower than the firm rsquo s minimum average variable cost.