TTU ECO 2305 FINAL EXAM REVIEW – TEXAS TECH ECONOMICS STUDY GUIDE &
PRACTICE QUESTIONS 2026/2027
a decrease in supply will cause the smallest increase in price when - ✔✔both supply and demand are
elastic
what is valid when supply is perfectly elastic at a price of $4 - ✔✔the elasticity of supply approaches
infinity
if the quantity demanded of a certain good responds only slightly to a change in the price of the good,
then the - ✔✔demand for the good is said to be inelastic
when the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the
quantity demanded is 80 units per month - using the midpoint method, the price elasticity of demand is
about - ✔✔.67
demand is inelastic if the price elasticity of demand is - ✔✔less than 1
in general, elasticity is a measure of - ✔✔how much buyers and sellers respond to changes in market
conditions
the price elasticity of supply measures how responsive - ✔✔sellers are to a change in price
if the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a - ✔✔3
percent increase in the quantity demanded
income elasticity of demand measures how - ✔✔the price of a good is affected when there is a change
in consumer income
there are very few, if any, good substitutes for automotive tires - therefore, the demand for automotive
tires would tend to be - ✔✔inelastic
the case of perfectly elastic demand is illustrated by a demand curve that is - ✔✔horizontal
demand is elastic if the price elasticity of demand is - ✔✔greater than 1
when the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the
quantity demanded is 100 units per month - using the midpoint method, the price elasticity of demand is
about - ✔✔.55
a perfectly inelastic demand implies that buyers - ✔✔purchase the same amount as before when the
price rises or falls
goods with many close substitutes tend to have - ✔✔more elastic demands
for a good that is a luxury, demand tends to be - ✔✔elastic
, a legal minimum on the price at which a good can be sold is called a - ✔✔price floor
the term tax incidence refers to - ✔✔the distribution of the tax burden between buyers and sellers
a legal maximum on the price at which a good can be sold is called a - ✔✔price ceiling
the maximum price that a buyer will pay for a good is called - ✔✔willingness to pay
the welfare of sellers is measured by - ✔✔producer surplus
consumer surplus is measured using - ✔✔the demand curve for a product
the study of how the allocation of resources affects economic well-being is called - ✔✔welfare
economics
Donald produces nails at a cost of $200 per ton - if he sells the nails for $350 per ton, his producer
surplus per ton is - ✔✔$150
cost is a measure of the - ✔✔seller's willingness to sell
producer surplus directly measures - ✔✔the well-being of sellers
George produces cupcakes and his production cost is $10 per dozen, he sells the cupcakes for $16 per
dozen - his producer surplus per dozen cupcakes is - ✔✔$6
externalities are - ✔✔side effects passed on to a party other than the buyers and sellers in a market
on a graph, the area below a demand curve and above the price measures - ✔✔consumer surplus
if a consumer places a value of$20 on a particular good and if the price of the good is $25, then the
consumer - ✔✔does not purchase the good
producer surplus equals - ✔✔amount received by sellers -(minus) cost of sellers
an American retailer purchased 5000 pairs of shoes from a company in Thailand in the second quarter of
2016 but does not sell them to a consumer until the third quarter of 2016 - what component of U.S. GDP
is affected by this transaction in the third quarter of 2016 - ✔✔only consumption and investment
if nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is - ✔✔83.33 and this
indicates that the price level has decreased by 16.67 percent since the base year
what is always measured in prices from a base-year - ✔✔real but not nominal GDP
what is the formula for calculating the inflation rate - ✔✔CPI this year -(minus) CPI last year /(divided)
CPI last year x(times) 100
PRACTICE QUESTIONS 2026/2027
a decrease in supply will cause the smallest increase in price when - ✔✔both supply and demand are
elastic
what is valid when supply is perfectly elastic at a price of $4 - ✔✔the elasticity of supply approaches
infinity
if the quantity demanded of a certain good responds only slightly to a change in the price of the good,
then the - ✔✔demand for the good is said to be inelastic
when the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the
quantity demanded is 80 units per month - using the midpoint method, the price elasticity of demand is
about - ✔✔.67
demand is inelastic if the price elasticity of demand is - ✔✔less than 1
in general, elasticity is a measure of - ✔✔how much buyers and sellers respond to changes in market
conditions
the price elasticity of supply measures how responsive - ✔✔sellers are to a change in price
if the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a - ✔✔3
percent increase in the quantity demanded
income elasticity of demand measures how - ✔✔the price of a good is affected when there is a change
in consumer income
there are very few, if any, good substitutes for automotive tires - therefore, the demand for automotive
tires would tend to be - ✔✔inelastic
the case of perfectly elastic demand is illustrated by a demand curve that is - ✔✔horizontal
demand is elastic if the price elasticity of demand is - ✔✔greater than 1
when the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the
quantity demanded is 100 units per month - using the midpoint method, the price elasticity of demand is
about - ✔✔.55
a perfectly inelastic demand implies that buyers - ✔✔purchase the same amount as before when the
price rises or falls
goods with many close substitutes tend to have - ✔✔more elastic demands
for a good that is a luxury, demand tends to be - ✔✔elastic
, a legal minimum on the price at which a good can be sold is called a - ✔✔price floor
the term tax incidence refers to - ✔✔the distribution of the tax burden between buyers and sellers
a legal maximum on the price at which a good can be sold is called a - ✔✔price ceiling
the maximum price that a buyer will pay for a good is called - ✔✔willingness to pay
the welfare of sellers is measured by - ✔✔producer surplus
consumer surplus is measured using - ✔✔the demand curve for a product
the study of how the allocation of resources affects economic well-being is called - ✔✔welfare
economics
Donald produces nails at a cost of $200 per ton - if he sells the nails for $350 per ton, his producer
surplus per ton is - ✔✔$150
cost is a measure of the - ✔✔seller's willingness to sell
producer surplus directly measures - ✔✔the well-being of sellers
George produces cupcakes and his production cost is $10 per dozen, he sells the cupcakes for $16 per
dozen - his producer surplus per dozen cupcakes is - ✔✔$6
externalities are - ✔✔side effects passed on to a party other than the buyers and sellers in a market
on a graph, the area below a demand curve and above the price measures - ✔✔consumer surplus
if a consumer places a value of$20 on a particular good and if the price of the good is $25, then the
consumer - ✔✔does not purchase the good
producer surplus equals - ✔✔amount received by sellers -(minus) cost of sellers
an American retailer purchased 5000 pairs of shoes from a company in Thailand in the second quarter of
2016 but does not sell them to a consumer until the third quarter of 2016 - what component of U.S. GDP
is affected by this transaction in the third quarter of 2016 - ✔✔only consumption and investment
if nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is - ✔✔83.33 and this
indicates that the price level has decreased by 16.67 percent since the base year
what is always measured in prices from a base-year - ✔✔real but not nominal GDP
what is the formula for calculating the inflation rate - ✔✔CPI this year -(minus) CPI last year /(divided)
CPI last year x(times) 100
