ECON 2213 FINAL EXAM QUESTIONS AND VERIFIED
ANSWERS
What is economics?
the science of making choices; how people use scarce resources to satisfy unlimited
wants.
What is scarcity?
limited wants to satisfy unlimited human wants; only exists if wants are left unsatisfied.
What are the factors of production and their rewards?
they're used to produce things that people want.
- Land = all natural resources
- Labor = human skills & efforts
- Capital = man made goods that produce other goods.
- Entrepreneurship = management of other resources.
What is the opportunity cost?
the value of the next best alternative given up.
Which points are attainable vs. unattainable on a PPF?
- points outside the curve = unattainable, insufficient resources
- points inside & on the curve = attainable
Which points are efficient/full employment vs. inefficient/unemployment on a PPF?
- efficiency = full employment = points on the curve
- inefficiency = unemployment = points inside the curve
What is the law of demand?
ceteris paribus, price and quantity demanded are inversely/negatively related.
How does a change in each determinant shift demand?
- income
- prices of related goods
- preferences
- # of buyers
, - expectations
What is the shape of the supply curve?
upward sloping
How does a change in each determinant shift supply?
- prices of resources = cost of production
increase in production costs results in decrease in supply.
- technology = improved technology results in an increase in supply.
- number of sellers = more sellers result in increase in supply.
- expectations of future price
what is equilibrium?
when the quantity supplied = the quantity demanded
what is a shortage?
excess demand at a particular price
what is a surplus?
excess supply
What is a business cycle and what are the phases?
rise and fall of economic activity.
peak = RGDP is at a temporary high
recession = when RGDP is declining
trough = lowest RGDP, lowest point of the cycle
expansion = when RGDP is increasing
what is the difference between GDP and RGDP?
GDP or nominal GDP = measured at current year prices/ dollars
RGDP= nominal GDP adjusted for price changes. measured at base year prices.
how is GDP measured by expenditure approach?
expenditure approach = spending on all final goods and services.
How is CPI calculated?
cost in current year/ cost in base year x 100
ANSWERS
What is economics?
the science of making choices; how people use scarce resources to satisfy unlimited
wants.
What is scarcity?
limited wants to satisfy unlimited human wants; only exists if wants are left unsatisfied.
What are the factors of production and their rewards?
they're used to produce things that people want.
- Land = all natural resources
- Labor = human skills & efforts
- Capital = man made goods that produce other goods.
- Entrepreneurship = management of other resources.
What is the opportunity cost?
the value of the next best alternative given up.
Which points are attainable vs. unattainable on a PPF?
- points outside the curve = unattainable, insufficient resources
- points inside & on the curve = attainable
Which points are efficient/full employment vs. inefficient/unemployment on a PPF?
- efficiency = full employment = points on the curve
- inefficiency = unemployment = points inside the curve
What is the law of demand?
ceteris paribus, price and quantity demanded are inversely/negatively related.
How does a change in each determinant shift demand?
- income
- prices of related goods
- preferences
- # of buyers
, - expectations
What is the shape of the supply curve?
upward sloping
How does a change in each determinant shift supply?
- prices of resources = cost of production
increase in production costs results in decrease in supply.
- technology = improved technology results in an increase in supply.
- number of sellers = more sellers result in increase in supply.
- expectations of future price
what is equilibrium?
when the quantity supplied = the quantity demanded
what is a shortage?
excess demand at a particular price
what is a surplus?
excess supply
What is a business cycle and what are the phases?
rise and fall of economic activity.
peak = RGDP is at a temporary high
recession = when RGDP is declining
trough = lowest RGDP, lowest point of the cycle
expansion = when RGDP is increasing
what is the difference between GDP and RGDP?
GDP or nominal GDP = measured at current year prices/ dollars
RGDP= nominal GDP adjusted for price changes. measured at base year prices.
how is GDP measured by expenditure approach?
expenditure approach = spending on all final goods and services.
How is CPI calculated?
cost in current year/ cost in base year x 100
