PRINCIPLES OF MICROECONOMICS FINAL
EXAM PREMIUM PREP PACK 2026 FULLY
SOLVED MATERIAL
◉ equilibrium. Answer: results in economically efficient level of
output, marginal benefit=marginal cost
◉ price floor. Answer: a legal minimum on the price a which a good
can be sold--only work above equilibrium
◉ price ceiling. Answer: a legal max on the price at which a good can
be sold--only works when below price equilibrium
◉ shortage. Answer: qd>qs
◉ tax incidence. Answer: actual division of a burden of a tax btw
buyers and sellers in a market
◉ ways to determine tax incidence. Answer: 1. immediate impact of
a tax levied on the sellers of that good ^tax-down profits for sellers-
down supply
2. tax on the sellers raises the cost of production and selling that
good
,3. we now can find the new market equilibrium price and quantity
◉ equation: total surplus =. Answer: producer surplus + consumer
surplus
◉ dead weight loss. Answer: reduction in economic surplus from a
market not being in a competitive equilibrium
◉ elasticity. Answer: a measure of how much one economic variable
responds to changes in another economic variable
◉ price elasticity of demand. Answer: responsiveness of the quantity
demanded to a change in price
◉ equation: price elasticity of demand= absolute value of x. Answer:
% change QD/% change price
◉ Determinants. Answer: 1. Availability of close substitutes
2. Luxury vs. Necessity
3. Passage of time
4. Definition in Market
5. Share of a good in consumers budget
, ◉ 1. Availability of close subsititues. Answer: no close substitutes:
inelastic demand
close substitutes: elastic demand
◉ 2. Luxury v. Necessities. Answer: Necessity: inelastic demand
Luxury: elastic demand
◉ 3. Passage of time. Answer: takes some time for consumers to
adjust their buying habits when prices change
short time period: inelastic-few sub.
long time period: elastic-more sub.
◉ 4. Definition in Market. Answer: narrowly defined: elastic
widely defined: inelastic
◉ 5. Share of a good in consumers budget. Answer: small
proportion: inelastic
large proportion: elastic
◉ Equation: total revenue=. Answer: price x quantity
◉ inelastic goods. Answer: ^price - ^total revenue
EXAM PREMIUM PREP PACK 2026 FULLY
SOLVED MATERIAL
◉ equilibrium. Answer: results in economically efficient level of
output, marginal benefit=marginal cost
◉ price floor. Answer: a legal minimum on the price a which a good
can be sold--only work above equilibrium
◉ price ceiling. Answer: a legal max on the price at which a good can
be sold--only works when below price equilibrium
◉ shortage. Answer: qd>qs
◉ tax incidence. Answer: actual division of a burden of a tax btw
buyers and sellers in a market
◉ ways to determine tax incidence. Answer: 1. immediate impact of
a tax levied on the sellers of that good ^tax-down profits for sellers-
down supply
2. tax on the sellers raises the cost of production and selling that
good
,3. we now can find the new market equilibrium price and quantity
◉ equation: total surplus =. Answer: producer surplus + consumer
surplus
◉ dead weight loss. Answer: reduction in economic surplus from a
market not being in a competitive equilibrium
◉ elasticity. Answer: a measure of how much one economic variable
responds to changes in another economic variable
◉ price elasticity of demand. Answer: responsiveness of the quantity
demanded to a change in price
◉ equation: price elasticity of demand= absolute value of x. Answer:
% change QD/% change price
◉ Determinants. Answer: 1. Availability of close substitutes
2. Luxury vs. Necessity
3. Passage of time
4. Definition in Market
5. Share of a good in consumers budget
, ◉ 1. Availability of close subsititues. Answer: no close substitutes:
inelastic demand
close substitutes: elastic demand
◉ 2. Luxury v. Necessities. Answer: Necessity: inelastic demand
Luxury: elastic demand
◉ 3. Passage of time. Answer: takes some time for consumers to
adjust their buying habits when prices change
short time period: inelastic-few sub.
long time period: elastic-more sub.
◉ 4. Definition in Market. Answer: narrowly defined: elastic
widely defined: inelastic
◉ 5. Share of a good in consumers budget. Answer: small
proportion: inelastic
large proportion: elastic
◉ Equation: total revenue=. Answer: price x quantity
◉ inelastic goods. Answer: ^price - ^total revenue
