ECON 1101 Final Exam Questions & Answers (2026/2027 A+ Grade Study
Guide)| Principles of Economics Study Guide
Budget Constraint - (answer)Represents the individual economic problem
2 possible products, 1 outcome
Affordable combinations are "attainable"
Unaffordable combinations are "unattainable"
In order to reach the unattainable: increase income
Trade-offs exist: budget line shows that with limited income, sacrifices (trade-offs) exist
Trade-off is constant therefore opportunity cost is also constant
What economic resources (or factors of production) are scarce? - (answer)Land, labour, capital,
entrepreneurial ability
What is the budget line for society? - (answer)Possible production curve
Assumptions of the PPC - (answer)Full employment, fixed resources and technology, 2 goods
Which of the following are straight? Which is curved? (PPC and budget constraint) - (answer)PPC -
curved
Budget constraint - straight
What makes the PPC curve? - (answer)Increasing opportunity cost - as the production of a good
increases the opportunity cost of producing an additional unit rises therefore NOT constant trade-off
because economic resources are not completely adaptable to alternative uses
What is optimal production? - (answer)MC=MB (or supply = demand)
How do you produce economic growth for the PPC? - (answer)More resources
Improved resource equality
Technological advances
, ECON 1101 Final Exam Questions & Answers (2026/2027 A+ Grade Study
Guide)| Principles of Economics Study Guide
Forgo consumption for capital goods = economic growth
What is the fallacy of composition? - (answer)the assumption that what is true for 1 individual is
necessarily true for a group of individuals
What is the post hoc fallacy? - (answer)when one event precedes another, the first event must have
caused the second
What is spuricious correlation? - (answer)two variables move together but are otherwise unrelated
What is the law of demand? - (answer)as the price of a good falls, the quantity demanded of that good
rises
What causes the demand curve to have an inverse relationship? - (answer)- diminishing marginal utility
(increased consumption = decreased marginal utility)
- Income and substitution effects
What is the income effect? - (answer)change in price of product effectively changes the consumer's
income which in turn changes the quantity demanded of a given product
What is the substitution effect? - (answer)When the price of one good increases, it decreases the
quantity demanded of that good and thus increases the quantity demanded of another good that is a
substitute for the first good
What causes a shift in the demand? - (answer)Increase income = increase demand (right shift)
Decrease income = decrease demand (left shift)
How do you find the market demand curve? - (answer)Sum the individual demand curves
Guide)| Principles of Economics Study Guide
Budget Constraint - (answer)Represents the individual economic problem
2 possible products, 1 outcome
Affordable combinations are "attainable"
Unaffordable combinations are "unattainable"
In order to reach the unattainable: increase income
Trade-offs exist: budget line shows that with limited income, sacrifices (trade-offs) exist
Trade-off is constant therefore opportunity cost is also constant
What economic resources (or factors of production) are scarce? - (answer)Land, labour, capital,
entrepreneurial ability
What is the budget line for society? - (answer)Possible production curve
Assumptions of the PPC - (answer)Full employment, fixed resources and technology, 2 goods
Which of the following are straight? Which is curved? (PPC and budget constraint) - (answer)PPC -
curved
Budget constraint - straight
What makes the PPC curve? - (answer)Increasing opportunity cost - as the production of a good
increases the opportunity cost of producing an additional unit rises therefore NOT constant trade-off
because economic resources are not completely adaptable to alternative uses
What is optimal production? - (answer)MC=MB (or supply = demand)
How do you produce economic growth for the PPC? - (answer)More resources
Improved resource equality
Technological advances
, ECON 1101 Final Exam Questions & Answers (2026/2027 A+ Grade Study
Guide)| Principles of Economics Study Guide
Forgo consumption for capital goods = economic growth
What is the fallacy of composition? - (answer)the assumption that what is true for 1 individual is
necessarily true for a group of individuals
What is the post hoc fallacy? - (answer)when one event precedes another, the first event must have
caused the second
What is spuricious correlation? - (answer)two variables move together but are otherwise unrelated
What is the law of demand? - (answer)as the price of a good falls, the quantity demanded of that good
rises
What causes the demand curve to have an inverse relationship? - (answer)- diminishing marginal utility
(increased consumption = decreased marginal utility)
- Income and substitution effects
What is the income effect? - (answer)change in price of product effectively changes the consumer's
income which in turn changes the quantity demanded of a given product
What is the substitution effect? - (answer)When the price of one good increases, it decreases the
quantity demanded of that good and thus increases the quantity demanded of another good that is a
substitute for the first good
What causes a shift in the demand? - (answer)Increase income = increase demand (right shift)
Decrease income = decrease demand (left shift)
How do you find the market demand curve? - (answer)Sum the individual demand curves
