ECON 101 FINAL EXAM UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

ECON 101 FINAL EXAM UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS

Question:
1. demand curve shift right
Answer:
higher demand

Question:
2. demand curve shift left
Answer:
lower demand

Question:
3. change income effect on demand of normal good
Answer:
increase demand

Question:
4. change income effect on demand of inferior good
Answer:
decrease demand

Question:
5. effect if substitute price increases on demand
Answer:
demand increases

Question:
6. demand effect if substitute price decreases on demand
Answer:
demand decreases

Question:
7. demand effect if complement price increases
Answer:
demand decreases

Question:
8. demand effect if complement price decreases
Answer:
demand increases

Question:
9. demand effect if price increase is anticipated

,Answer:
demand increase

Question:
10. demand effect if price decrease is anticipated
Answer:
demand decrease

Question:
11. 4 determinants of price elasticity of demand
Answer:
availability of close substitutes necessities vs luxuries definition of the market time horizon

Question:
12. availability of close substitutes --> price elasticity of demand
Answer:
close substitutes more available = more elastic

Question:
13. necessities vs luxuries
Answer:
luxury: more elastic necessity: less elastic

Question:
14. definition of the market
Answer:
narrow (apple): more elastic broad (fruit): less elastic

Question:
15. time horizon
Answer:
long period of time = possible major behavior adjustments --> more elastic

Question:
16. calculate price elasticity of demand
Answer:
% change in Qd / % change in P

Question:
17. Adam Smith in the Wealth of Nations (1776)
Answer:
household and firms acts as if "led by an invisible hand" to promote general economic wellbeing

Question:
18. 3 ways governments can improve market incomes

, Answer:
1. enforce property rights
2. Promote efficiency
3. Promote equality

Question:
19. governments can improve market incomes: enforce property rights
Answer:
individuals can own and control scarce resources

Question:
20. governments can improve market incomes: promote efficiency
Answer:
correct for market failures
- externalities

Question:
21. governments can improve market incomes: promote equality
Answer:
redistribute wealth

Question:
22. price ceilings above equilibrium are/are not binding
Answer:
are not binding

Question:
23. price floors below the equilibrium are/are not binding
Answer:
are not binding

Question:
24. effect of binding price ceilings: supply supply and demand elasticity
Answer:
binding if below equilibrium
- cause shortages & grow overtime
- price falls to the ceiling
- supply and demand become more elastic

Question:
25. the methods sellers use to ration goods among buyers during shortages are often...
Answer:
unfair and inefficient purchase limits, long lines, discrimination according to seller bias, etc.

Question:
26. taxes on sellers make the sellers responsible for...