ECON 201 EXAM 1 STUDY GUIDE
QUESTIONS AND ANSWERS
100% PASS
Opportunity cost - ✔✔The real cost of an item: what you must give up in order to get it
Marginal decisions - ✔✔A decision made at the "margin" of an activity to do a bit more
or a bit less of that activity.
Equilibrium - ✔✔An economic situation in which no individual would be better off
doing something different
Efficiency and equity - ✔✔The difference between efficiency and equity is people or
governments being able to make themselves better off without making someone else
worse off (efficiently) and when everyone is getting equal amount or their fair share
(equity).
"Other things equal" - ✔✔In the development of a model, the assumption that all
relevant factors except the one under study remain unchanged
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, Comparative advantage - ✔✔The advantage conferred on an individual or country in
producing a food or service if the opportunity cost of producing the good or service is
lower for that individual or country than for other producers
Normative versus positive economics - ✔✔Normal- The branch of economic analysis
that makes prescriptions about the way the economy should work.
Positive- The branch of economics that describes the way the economy actually works.
Law of demand - ✔✔The principle that a higher price for a good or service, other things
equal, leads people to demand a smaller quantity of that good or service.
Change in demand versus a change in quantity demanded - ✔✔A change in demand
results from a change in the underlying determinants of demand. This is shown by a
shift in the demand curve. A change in quantity demanded results from a change in
price of the good. Graphically this is shown by movement along the demand curve.
Substitute good - ✔✔Pairs of goods for which a rise in the price of one good with lead
to a increase in the demand for the other good.
Complement good - ✔✔Pairs of goods for which a rise in the price of one good leads to
a decrease in the demand for the other good
Normal good - ✔✔A good for which a rise in income increases the demand for that
good.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
QUESTIONS AND ANSWERS
100% PASS
Opportunity cost - ✔✔The real cost of an item: what you must give up in order to get it
Marginal decisions - ✔✔A decision made at the "margin" of an activity to do a bit more
or a bit less of that activity.
Equilibrium - ✔✔An economic situation in which no individual would be better off
doing something different
Efficiency and equity - ✔✔The difference between efficiency and equity is people or
governments being able to make themselves better off without making someone else
worse off (efficiently) and when everyone is getting equal amount or their fair share
(equity).
"Other things equal" - ✔✔In the development of a model, the assumption that all
relevant factors except the one under study remain unchanged
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, Comparative advantage - ✔✔The advantage conferred on an individual or country in
producing a food or service if the opportunity cost of producing the good or service is
lower for that individual or country than for other producers
Normative versus positive economics - ✔✔Normal- The branch of economic analysis
that makes prescriptions about the way the economy should work.
Positive- The branch of economics that describes the way the economy actually works.
Law of demand - ✔✔The principle that a higher price for a good or service, other things
equal, leads people to demand a smaller quantity of that good or service.
Change in demand versus a change in quantity demanded - ✔✔A change in demand
results from a change in the underlying determinants of demand. This is shown by a
shift in the demand curve. A change in quantity demanded results from a change in
price of the good. Graphically this is shown by movement along the demand curve.
Substitute good - ✔✔Pairs of goods for which a rise in the price of one good with lead
to a increase in the demand for the other good.
Complement good - ✔✔Pairs of goods for which a rise in the price of one good leads to
a decrease in the demand for the other good
Normal good - ✔✔A good for which a rise in income increases the demand for that
good.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
