Econ 302 Exam 1,2,3 &4 Package Deal

Law of Demand - Answer There is an inverse relationship between price and quantity demanded When the price RISES , quantity demanded FALLS Choke Price - Answer The price at which quantity demanded is equal to zero. The intercept of the inverse demand curve Ceteris Paribus Conditi...

Price-Consumption Curve (PCC) - Answers Shows how the consumer's optimal bundle changes when the price of a good changes while holding the price of other goods and income constant Steps for PCC: U(X,Y) = X*Y - Answers 1) Use M/Px and M/Py to draw all budget constraints 2) X* = (α/(α+β)) * (...

rational behavior - Answer a consumer will choose the best bundle of goods that he or she can afford bundle of goods - Answer a collection of goods, amount is specified budget constraint - Answer what we "can afford", limited based on how much money they have vs. the price of the good "w...

In the supply and demand model, we assume that there are _____ buyer(s) and _____ seller(s) in the market. - Answer Many; Many Which of the following factors shift the demand curve? I)Consumer Income II)Price of the Good III)Prices of Substitute Goods IV)The Number of Consumers - Answer I, II...

We assume that the representative consumer's preferences exhibit the properties that - Answer consumption and leisure are both normal goods and that the consumer likes diversity in his or her consumption bundle. We assume leisure is a normal good. This implies that - Answer an increase in taxes ...

The law of diminishing marginal returns assumes that A. Additional inputs are added in smaller and smaller increments B. there is at least one fixed input C. All inputs are changed by the same percentage D. All inputs are held constant - Answer B If indifference curves cross, then A. Consume...

economics of ideas - Answer -involves increasing returns to scale -lead to problems with Adam-Smiths invisible hand theory Romer Model divides the world into - Answer 1. Objects -capital and labor inputs from Solow Model -these are finite 2. Ideas -used in production of goods -virtually inf...

Profit - Answer difference between revenue and total cost pi(q) = R(q)-TC(q) Revenue - Answer Price multiplied by quantity R = P*q Price Talker - Answer When firms (or buyers) take the market price as given and make their selling (or buying) decisions accordingly. Level of output has no effe...

Consumer Theory Assumption: - Answer A consumer will choose the best bundle of goods and services that he or she can afford Rational Behavior - Answer People do not make decisions that intentionally make them worse off Budget Constraint Definition - Answer Shows the set of all bundles that a c...

Substitutes.... When the price of Y increases then X goes higher.. - Answer Are they complements or subs? X = M+Py/2Px When Py gets bigger, than X gets higher so this means they are Only can add the exponents when they are being multiplied... if you are adding them then you must plug them in ....

price- consumption curve - Answer curve tracing the utility maximizing combinations of two goods as the price of one good changes individual demand curve - Answer a curve that relates the price of good x to the quantity of good x that a consumer will buy holding all other factors -as price fall...

In the Keynesian cross diagram, if the marginal propensity to consume is 0.75, then a $100 million increase in government spending will increase output by - Answer $400 million If the marginal propensity to consume is 0.75 and the interest rate is fixed, then a $100 million increase in taxes will...

Budget Constraint - Answer represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income Marginal Rate of Transformation - Answer the rate at which a consumer is able to trade one good for another, the amount of good Y a con...

What does the study of macroeconomics entail? - Answer The study of economy at the large scale level, examining total output, the price level, and other aggregate measures in the economy. (Think macro as the forest and micro as the trees) What is the capital? What are some examples of capital? - ...