ECON 2100 FINAL REVIEW QUESTIONS
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. - Answer -Opportunity Cost = Actual Cost + Cost of Foregoing
Sacrifices
Demand Curve - 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: - 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 ________. - Answer -
normal good; increase. Examples: gasoline, electricity
(2) As income increases the demand for a ___________ will ________. - 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: - 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: - Answer -complements. Examples: iPods and music downloads,
gasoline and cars
Supply Curve - 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: - 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. - Answer -Equilibrium
, The price that balances quantity supplied and quantity demanded. - Answer -
Equilibrium Price
The quantity demanded and the quantity supplied at the equilibrium price. - Answer -
Equilibrium Quantity
When price > equilibrium price, then quantity supplied is greater than quantity
demanded. This is called: - Answer -Surplus
When price < equilibrium price, then quantity supplied is less than quantity demanded.
This is called: - Answer -Shortage
The percentage change in quantity demanded given a percentage in price. - 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. - Answer -Price Elasticity of Demand
Demand tends to be more elastic given: - 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 - Answer -inelastic
Luxuries tend to have ______________ demands - Answer -elastic
The Midpoint Method (Price Elasticity of Demand) - Answer -{(Q2 - Q1)/[(Q1 + Q2)/2] }/
{(P2 - P1)/[(P1 + P2)/2]}
Inelastic Demand - Answer -1. Price Elasticity of Demand < 1
2. Quantity demanded does not respond strongly to changes in price
Elastic Demand - Answer -1. Price Elasticity of Demand > 1
2. Quantity demanded responds strongly to changes in price
Perfectly Inelastic Demand - Answer -Elasticity = 0
Unit Elastic Demand - Answer -Elasticity = 1
Perfectly Elastic Demand - Answer -Elasticity = ∞
The amount paid by buyers and received by sellers. - Answer -Total Revenue. TR = P x
Q
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. - Answer -Opportunity Cost = Actual Cost + Cost of Foregoing
Sacrifices
Demand Curve - 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: - 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 ________. - Answer -
normal good; increase. Examples: gasoline, electricity
(2) As income increases the demand for a ___________ will ________. - 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: - 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: - Answer -complements. Examples: iPods and music downloads,
gasoline and cars
Supply Curve - 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: - 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. - Answer -Equilibrium
, The price that balances quantity supplied and quantity demanded. - Answer -
Equilibrium Price
The quantity demanded and the quantity supplied at the equilibrium price. - Answer -
Equilibrium Quantity
When price > equilibrium price, then quantity supplied is greater than quantity
demanded. This is called: - Answer -Surplus
When price < equilibrium price, then quantity supplied is less than quantity demanded.
This is called: - Answer -Shortage
The percentage change in quantity demanded given a percentage in price. - 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. - Answer -Price Elasticity of Demand
Demand tends to be more elastic given: - 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 - Answer -inelastic
Luxuries tend to have ______________ demands - Answer -elastic
The Midpoint Method (Price Elasticity of Demand) - Answer -{(Q2 - Q1)/[(Q1 + Q2)/2] }/
{(P2 - P1)/[(P1 + P2)/2]}
Inelastic Demand - Answer -1. Price Elasticity of Demand < 1
2. Quantity demanded does not respond strongly to changes in price
Elastic Demand - Answer -1. Price Elasticity of Demand > 1
2. Quantity demanded responds strongly to changes in price
Perfectly Inelastic Demand - Answer -Elasticity = 0
Unit Elastic Demand - Answer -Elasticity = 1
Perfectly Elastic Demand - Answer -Elasticity = ∞
The amount paid by buyers and received by sellers. - Answer -Total Revenue. TR = P x
Q
