ECON 2100 Final Exam Review with precise detailed ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answers
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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
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3. Tastes ||\\//||
4. Expectations
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5. Number of Buyers
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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
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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
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, When price < equilibrium price, then quantity supplied is less than quantity demanded. This
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
is called: - correct answer✔✔Shortage
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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)
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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
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answers
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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
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
