Econ 201 Midterm Exam: Updated Solution: Questions & Answers: Guaranteed A+ Score

equilibrium (Ans- A situation in which the market price has reached the level at which quantity supplied equals quantity demanded equilibrium price (Ans- The price that balances quantity supplied and quantity demanded equilibrium quantity (Ans- The quantity supplied and the quantity demanded at the equilibrium price surplus (Ans- a situation in which quantity supplied is greater than quantity demanded Shortage (Ans- a situation in which quantity demanded is greater than quantity supplied law of supply and demand (Ans- The claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance Elasticity (Ans- a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants price elasticity of demand (Ans- a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price midpoint method (Ans- (Q2-Q1)/ [(Q2+Q1)/2] DIVIDED BY (P2-P1)/[(P2+P1)/2] total revenue (in a market) (Ans- the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold perfectly inelastic demand (Ans- elasticity = 0 inelastic demand (Ans- elasticity is less than 1 unit elastic demand (Ans- elasticity = 1