ECON 2100 Final Review Questions With Correct Answers

ECON 2100 Final Review Questions With
Correct Answers

The |____________ |of |a |choice |is |what |you |give |up |in |order |to |get |it. |It |includes |both |the |
actual |monetary |amount |paid |and |the |monetary |value |of |any |other |sacrifices |made |without |
direct |payment. |- |CORRECT |ANSWER✔✔-Opportunity |Cost |= |Actual |Cost |+ |Cost |of |Foregoing |
Sacrifices



Demand |Curve |- |CORRECT |ANSWER✔✔-a |graph |of |the |relationship |between |the |price |of |a |
good |and |the |quantity |demanded



Shifts |in |the |demand |curve |can |be |caused |by: |- |CORRECT |ANSWER✔✔-1. |Consumer |income

2. |Price |of |related |goods

3. |Tastes

4. |Expectations

5. |Number |of |Buyers



Mnemonic: |CPTEN |(captain)



(1) |As |income |increases |the |demand |for |a |___________ |will |________. |- |CORRECT |
ANSWER✔✔-normal |good; |increase. |Examples: |gasoline, |electricity



(2) |As |income |increases |the |demand |for |a |___________ |will |________. |- |CORRECT |
ANSWER✔✔-inferior |good; |decreases. |Examples: |rental |apartments, |bus |rides

,When |a |fall |in |the |price |of |one |good |reduces |the |demand |for |another |good, |the |two |goods |
are |called: |- |CORRECT |ANSWER✔✔-substitutes. |Examples: |tea |and |coffee, |hot |dogs |and |
hamburgers



When |a |fall |in |the |price |of |one |good |increases |the |demand |for |another |good, |the |two |goods |
are |called: |- |CORRECT |ANSWER✔✔-complements. |Examples: |iPods |and |music |downloads, |
gasoline |and |cars



Supply |Curve |- |CORRECT |ANSWER✔✔-a |graph |of |the |relationship |between |the |price |of |a |good
|and |the |quantity |supplied




Shifts |in |the |supply |curve |can |be |caused |by: |- |CORRECT |ANSWER✔✔-1. |Input |prices

2. |Technology

3. |Expectations

4. |Number |of |Sellers



Mnemonic: |ITEN



A |situation |in |which |the |price |has |reached |the |level |where |quantity |supplied |equals |quantity |
demanded. |- |CORRECT |ANSWER✔✔-Equilibrium



The |price |that |balances |quantity |supplied |and |quantity |demanded. |- |CORRECT |ANSWER✔✔-
Equilibrium |Price



The |quantity |demanded |and |the |quantity |supplied |at |the |equilibrium |price. |- |CORRECT |
ANSWER✔✔-Equilibrium |Quantity



When |price |> |equilibrium |price, |then |quantity |supplied |is |greater |than |quantity |demanded. |
This |is |called: |- |CORRECT |ANSWER✔✔-Surplus

, When |price |< |equilibrium |price, |then |quantity |supplied |is |less |than |quantity |demanded. |This |is
|called: |- |CORRECT |ANSWER✔✔-Shortage




The |percentage |change |in |quantity |demanded |given |a |percentage |in |price. |- |CORRECT |
ANSWER✔✔-Price |Elasticity |of |Demand



A |measure |of |how |much |the |quantity |demanded |of |a |good |responds |to |a |change |in |the |price |
of |the |good. |- |CORRECT |ANSWER✔✔-Price |Elasticity |of |Demand



Demand |tends |to |be |more |elastic |given: |- |CORRECT |ANSWER✔✔-1. |a |larger |number |of |close |
substitutes |(easier |to |switch)

2. |if |the |good |is |a |luxury

3. |a |more |narrowly |defined |market |(Easier |to |find |substitutes |for |narrowly |defined |categories |
of |goods)

4. |a |longer |time |period |(Consumers |take |time |to |respond |to |price |changes)



Necessities |tend |to |have |____________ |demands |- |CORRECT |ANSWER✔✔-inelastic



Luxuries |tend |to |have |______________ |demands |- |CORRECT |ANSWER✔✔-elastic



The |Midpoint |Method |(Price |Elasticity |of |Demand) |- |CORRECT |ANSWER✔✔-{(Q2 |- |Q1)/[(Q1 |+ |
Q2)/2] |}/ |{(P2 |- |P1)/[(P1 |+ |P2)/2]}



Inelastic |Demand |- |CORRECT |ANSWER✔✔-1. |Price |Elasticity |of |Demand |< |1

2. |Quantity |demanded |does |not |respond |strongly |to |changes |in |price



Elastic |Demand |- |CORRECT |ANSWER✔✔-1. |Price |Elasticity |of |Demand |> |1