# Economic models, the correlation among economic factors

**Introductory skill self-assessment:**

This course assumes student proficiency in general math problem solving techniques, as well as general statistical and graphing concepts. The concepts covered in this skill assessment are used throughout the course, as well as in subsequent business courses. If you find that you are unsure of how to answer one or more of the questions below, you will want to review the concept listed with the question. As foundational skills, instruction on the techniques listed below is not part of course content and will not be covered in course instruction. Assistance can be provided outside of scheduled class sessions, and tutorial resources are provided through Student Services. Supplemental resources are listed on the course Canvas site. NOTE: You will have difficulty with homework and quiz questions without the ability to perform the types of calculations on the skills assessment. The goal here is to identify gaps early, so you can get assistance.

**NOTE:** You will need to create and upload graphs to complete this and other course assignments. See ‘Uploading files’ in the ‘Getting Started’ module for details on course expectations.

- CORRELATION:

In economic models, the correlation among economic factors is closely studied. Give the direction of impact for the following events:

If two factors are positively correlated and one goes down, the second factor will _______________.

If two factors are negatively correlated and one goes up, the second factor will _____________.

- INTERPRETING CHARTS

In supply and demand analysis, charts and graphs are used to represent expected market outcomes. The following chart describes the supply and demand for a six pack of hard cider:

Price |
Quantity Demanded |
Quantity Supplied |

3 | 8,000 | 2,000 |

4 | 7,000 | 3,000 |

5 | 6,000 | 4,000 |

6 | 5,000 | 5,000 |

7 | 4,000 | 6,000 |

8 | 3,000 | 7,000 |

9 | 2,000 | 8,000 |

Using the chart, answer the following:

- At a market price of $5, what is the quantity demanded and the quantity supplied of hard cider?
- What will be the equilibrium price for hard cider in the market?
- At what point would there be a market surplus of hard cider of 2,000 units?
- If the price of hard cider drops from $8 to $7, what will be the impact in the market, in terms of quantity demanded and quantity supplied?

- GRAPHING:

The study of supply and demand relies heavily on graph analysis. Create a graph for each of the following:

- Plot the following information on two factors, Price (vertical axis) and Quantity (horizontal axis):

- Plot the changes to the graph in 3a above if Quantity values are
__increased__by 10 each, as given below:

- AVERAGE ANNUAL GROWTH RATE:

Find the average annual growth rate for a company’s sales over the following 5 year period:

Note: the average growth rate is found by calculating the growth rate for each year, then finding the average of the four annual rates. The annual growth rate = (Ending value – beginning value)/beginning value

__Annual growth rate__

Year 1 100,000

Year 2 110,000 _________

Year 3 117,000 _________

Year 4 130,000 _________

Year 5 145,000 _________

Average growth rate: _________

- WEIGHTED AVERAGE:

You buy regular unleaded gas every day for three days. The first day you buy 10 gallons for $3.50 a gallon. The second day you buy 6 gallons for $3.00 a gallon. The third day you buy 4 gallons for $3.25 a gallon. What is the average price you paid for gas over the three days?

*Note: You will need to calculate the weighted average of the gas prices, with a total purchase of 20 gallons of gas. The ‘Course Resources’ section on the course Canvas site (bottom of the ‘Modules’ section of the course) includes instructions for calculating a weighted average, with two formats (table and equation) – feel free to use whichever format is more comfortable for you.*