EC 308 Exam# 1-Solved 100% Correct
4 assumptions in S&D Model - ANS-1. single market
2. all goods are identical
3. all goods have same price; everyone has same information
4. many producers and consumers
factors that influence demand - ANS--price
-# of consumers
-consumer income
-consumer tastes
-price of other goods (subs and comps)
factors that influence supply - ANS--price
-suppliers' cost of production
-# of sellers
-sellers' outside options
magnitude of change in eq. p and q is determined by - ANS-1. size of shift
2. slope of curve (inversely related)
variables that affect elasticity of demand - ANS--availability of close substitutes
-breadth of market
-type of product (necessity vs. luxury item)
-% of income spent on good
-time horizon of the analysis
variables that affect elasticity of supply - ANS--ease/demands of production
-time horizon of the analysis
perfectly elastic - ANS-horizontal line
perfectly inelastic - ANS-vertical line
inferior good - ANS-A good for which quantity demanded decreases when income
rises; EiD <0
normal good - ANS-A good for which quantity demanded rises when income rises;
EiD>0
luxury good - ANS-EiD>1
complement - ANS-cross price elasticity is negative
substitute - ANS-cross price elasticity is positive
unrelated goods - ANS-cross price elasticity=0
4 assumptions in S&D Model - ANS-1. single market
2. all goods are identical
3. all goods have same price; everyone has same information
4. many producers and consumers
factors that influence demand - ANS--price
-# of consumers
-consumer income
-consumer tastes
-price of other goods (subs and comps)
factors that influence supply - ANS--price
-suppliers' cost of production
-# of sellers
-sellers' outside options
magnitude of change in eq. p and q is determined by - ANS-1. size of shift
2. slope of curve (inversely related)
variables that affect elasticity of demand - ANS--availability of close substitutes
-breadth of market
-type of product (necessity vs. luxury item)
-% of income spent on good
-time horizon of the analysis
variables that affect elasticity of supply - ANS--ease/demands of production
-time horizon of the analysis
perfectly elastic - ANS-horizontal line
perfectly inelastic - ANS-vertical line
inferior good - ANS-A good for which quantity demanded decreases when income
rises; EiD <0
normal good - ANS-A good for which quantity demanded rises when income rises;
EiD>0
luxury good - ANS-EiD>1
complement - ANS-cross price elasticity is negative
substitute - ANS-cross price elasticity is positive
unrelated goods - ANS-cross price elasticity=0
