ECO 320 EXAM 1 REVIEW QUESTIONS AND ANSWERS| NEW UPDATE WITH 100%
CORRECT ANSWERS
Demand Willingness to pay (marginal benefit)
Supply Willingess to sell (marginal cost)
Demand shifters Price of related goods (complements / substitutes), income (normal goods
/ inferior goods), number of consumers, tastes, expectations
Supply shifters Price of related goods in production, input prices, number of suppliers,
technology, expectations
Normal goods as income increases, demand increases
Inferior goods as income increases, demand decreases
Problem of price ceiling creates shortage, inefficient allocation of the good, creates black
markets
If we expect shortages form lines, lottery
Arbitrage buying in one market (low) selling in another market (high)
Competitive market "perfect" lots of buyers and sellers, identical products, easy entrance
and exit of market
Monopoly single seller, unique product, entry into market is blocked
CORRECT ANSWERS
Demand Willingness to pay (marginal benefit)
Supply Willingess to sell (marginal cost)
Demand shifters Price of related goods (complements / substitutes), income (normal goods
/ inferior goods), number of consumers, tastes, expectations
Supply shifters Price of related goods in production, input prices, number of suppliers,
technology, expectations
Normal goods as income increases, demand increases
Inferior goods as income increases, demand decreases
Problem of price ceiling creates shortage, inefficient allocation of the good, creates black
markets
If we expect shortages form lines, lottery
Arbitrage buying in one market (low) selling in another market (high)
Competitive market "perfect" lots of buyers and sellers, identical products, easy entrance
and exit of market
Monopoly single seller, unique product, entry into market is blocked
