ECON 101 UPDATED EVALUATION EXAMS
QUESTIONS AND ANSWERS SURE A+
✔✔Demand Curve Shifters: Income - ✔✔Demand for a normal good is positively related
to income.
Increase in income causes increase in quantity demanded at each price, shifts D curve
to the right.
(Demand for an inferior good is negatively related to income. An increase in income
shifts D curves for inferior goods to the left.)
✔✔Demand Curve Shifters: Prices of Related Goods - ✔✔-Two goods are substitutes if
an increase in the price of one causes an increase in demand for the other.
Example: pizza and hamburgers. An increase in the price of pizza increases demand for
hamburgers, shifting hamburger demand curve to the right.
Other examples: Coke and Pepsi, laptops and desktop computers, CDs and music
downloads
-Two goods are complements if an increase in the price of one causes a fall in demand
for the other.
Example: computers and software. If price of computers rises, people buy fewer
computers, and therefore less software. Software demand curve shifts left.
Other examples: college tuition and textbooks, bagels and cream cheese, eggs and
bacon
, ✔✔Demand Curve Shifters: Tastes - ✔✔Anything that causes a shift in tastes toward a
good will increase demand for that good and shift its D curve to the right.
Example: The Atkins diet became popular in the '90s, caused an increase in demand for
eggs, shifted the egg demand curve to the right.
✔✔Demand Curve Shifters: Expectations - ✔✔Expectations affect consumers' buying
decisions.
Examples:
If people expect their incomes to rise, their demand for meals at expensive restaurants
may increase now.
If the economy sours and people worry about their future job security, demand for new
autos may fall now.
✔✔ - ✔✔-Price causes a movement along the D curve
-# of buyers shifts the D curve
-Income shifts the D curve
-Price of related goods shifts the D curve
-Tastes shifts the D curve
-Expectations shifts the D curve
✔✔The quantity supplied of any good is... - ✔✔the amount that sellers are willing and
able to sell.
✔✔Law of supply: - ✔✔the claim that the quantity supplied of a good rises when the
price of the good rises, other things equal
✔✔Supply schedule: - ✔✔A table that shows the relationship between the price of a
good and the quantity supplied.
Example: Starbucks' supply of lattes.
✔✔Market Supply - ✔✔The quantity supplied in the market is the sum of the quantities
supplied by all sellers at each price.
Suppose Starbucks and Peet's are the only two sellers in this market. (Qs = quantity
supplied)
✔✔Supply Curve Shifters - ✔✔The supply curve shows how price affects quantity
supplied, other things being equal.
These "other things" are non-price determinants of supply.
Changes in them shift the S curve...
✔✔Supply Curve Shifters: Input Prices - ✔✔Examples of input prices: wages, prices of
raw materials.
A fall in input prices makes production more profitable at each output price, so firms
supply a larger quantity at each price, and the S curve shifts to the right.
QUESTIONS AND ANSWERS SURE A+
✔✔Demand Curve Shifters: Income - ✔✔Demand for a normal good is positively related
to income.
Increase in income causes increase in quantity demanded at each price, shifts D curve
to the right.
(Demand for an inferior good is negatively related to income. An increase in income
shifts D curves for inferior goods to the left.)
✔✔Demand Curve Shifters: Prices of Related Goods - ✔✔-Two goods are substitutes if
an increase in the price of one causes an increase in demand for the other.
Example: pizza and hamburgers. An increase in the price of pizza increases demand for
hamburgers, shifting hamburger demand curve to the right.
Other examples: Coke and Pepsi, laptops and desktop computers, CDs and music
downloads
-Two goods are complements if an increase in the price of one causes a fall in demand
for the other.
Example: computers and software. If price of computers rises, people buy fewer
computers, and therefore less software. Software demand curve shifts left.
Other examples: college tuition and textbooks, bagels and cream cheese, eggs and
bacon
, ✔✔Demand Curve Shifters: Tastes - ✔✔Anything that causes a shift in tastes toward a
good will increase demand for that good and shift its D curve to the right.
Example: The Atkins diet became popular in the '90s, caused an increase in demand for
eggs, shifted the egg demand curve to the right.
✔✔Demand Curve Shifters: Expectations - ✔✔Expectations affect consumers' buying
decisions.
Examples:
If people expect their incomes to rise, their demand for meals at expensive restaurants
may increase now.
If the economy sours and people worry about their future job security, demand for new
autos may fall now.
✔✔ - ✔✔-Price causes a movement along the D curve
-# of buyers shifts the D curve
-Income shifts the D curve
-Price of related goods shifts the D curve
-Tastes shifts the D curve
-Expectations shifts the D curve
✔✔The quantity supplied of any good is... - ✔✔the amount that sellers are willing and
able to sell.
✔✔Law of supply: - ✔✔the claim that the quantity supplied of a good rises when the
price of the good rises, other things equal
✔✔Supply schedule: - ✔✔A table that shows the relationship between the price of a
good and the quantity supplied.
Example: Starbucks' supply of lattes.
✔✔Market Supply - ✔✔The quantity supplied in the market is the sum of the quantities
supplied by all sellers at each price.
Suppose Starbucks and Peet's are the only two sellers in this market. (Qs = quantity
supplied)
✔✔Supply Curve Shifters - ✔✔The supply curve shows how price affects quantity
supplied, other things being equal.
These "other things" are non-price determinants of supply.
Changes in them shift the S curve...
✔✔Supply Curve Shifters: Input Prices - ✔✔Examples of input prices: wages, prices of
raw materials.
A fall in input prices makes production more profitable at each output price, so firms
supply a larger quantity at each price, and the S curve shifts to the right.
