ECN 221 Exam 1 Review – Arizona State
University – Foundational Concepts in
Microeconomics with Definitions and Graphs
How does a change in supply appear on the graph? 1. move supply to the right to show
an increase
2. move supply to the left to show an decrease
Supply and demand determine both equilibrium price and equilibrium quantity in a market. At
the market equilibrium price, QD and QS are equal
Market creates _____ outcomes for individuals and society pareto optimal
What is the market learning (equilibrium) condition? When QS=QD
The market may not produce fair outcomes but it produces the most ___ outcomes
efficient
Price controls do not allow the market price to act as a rationing divide. List and briefly describe
the two types of price controls? 1. price ceilings (gov. max p to help consumers)
2. price floors (gov. min p to help sellers)
what problems do price ceilings create? 1. fewer trades
2. black markets
3. non pricing rationing
4. shortages
, 5. higher prices in some cases
what problems do price floors create? 1. fewer trades
2. black markets
3. non pricing rationing
4. surpluses
5. lower prices in some cases
what are the three solutions to correct the negative effects of a price ceiling or floor? 1.
eliminate control
2. try to change demand
3. try to change supply
when and where was "economics" as a science born? 17th and 18th century in Western
Europe
Changes in what three institutions led to the fall of feudalism and the rise of capitalism as an
economic system? culture, politics, and economy
Who was the father of modern economic thought? To what group of economists did he belong
to? Adam Smith and he belonged to classical economists.
The founder of modern economic thought told a story about what three professions when he
explained how individual self-interest promotes the greatest benefits for society. Butcher,
brewer, and baker
University – Foundational Concepts in
Microeconomics with Definitions and Graphs
How does a change in supply appear on the graph? 1. move supply to the right to show
an increase
2. move supply to the left to show an decrease
Supply and demand determine both equilibrium price and equilibrium quantity in a market. At
the market equilibrium price, QD and QS are equal
Market creates _____ outcomes for individuals and society pareto optimal
What is the market learning (equilibrium) condition? When QS=QD
The market may not produce fair outcomes but it produces the most ___ outcomes
efficient
Price controls do not allow the market price to act as a rationing divide. List and briefly describe
the two types of price controls? 1. price ceilings (gov. max p to help consumers)
2. price floors (gov. min p to help sellers)
what problems do price ceilings create? 1. fewer trades
2. black markets
3. non pricing rationing
4. shortages
, 5. higher prices in some cases
what problems do price floors create? 1. fewer trades
2. black markets
3. non pricing rationing
4. surpluses
5. lower prices in some cases
what are the three solutions to correct the negative effects of a price ceiling or floor? 1.
eliminate control
2. try to change demand
3. try to change supply
when and where was "economics" as a science born? 17th and 18th century in Western
Europe
Changes in what three institutions led to the fall of feudalism and the rise of capitalism as an
economic system? culture, politics, and economy
Who was the father of modern economic thought? To what group of economists did he belong
to? Adam Smith and he belonged to classical economists.
The founder of modern economic thought told a story about what three professions when he
explained how individual self-interest promotes the greatest benefits for society. Butcher,
brewer, and baker
