ECN 104 Midterm Exam 2024 with Complete Solutions
Rationing function of prices - Answer- The ability of competitive forces of supply and demand to establish a price at which selling and buying are consistent.
Productive Efficiency - Answer- Producing the right amount of goods, and the lowest co...
Rationing function of prices - Answer- The ability of competitive forces of supply and
demand to establish a price at which selling and buying are consistent.
Productive Efficiency - Answer- Producing the right amount of goods, and the lowest
cost, with the best technology.
Allocative Efficency - Answer- Producing the right amount of each product as per
market demand.
Price Ceiling - Answer- The maximum legal amount that that a seller may sell a product
for or provide a service. This margin is controlled by the government. i.e. Rent Control
Price Floor - Answer- The minimum legal amount that a seller may sell a product or
provide a service. This is controlled by the government. i.e. If a group is being
underpaid because of low selling costs, the government will raise the price floor.
Elasticity - Answer- A measure of the responsiveness of quantity demand, or quantity
supplied to one of its determinants. The more substitutions a product has, the more
elastic it is(the line is more horizontal)
Law of demand - Answer- An increase in price, reduces the increase in demand, and
vice versa.
Market - Answer- A place where exchanges take place.
Factor Market - Answer- The market that supplies factors for a company, such as labor,
capital, land, raw materials.
The income effect - Answer- The lower the price of a product, the higher the purchasing
power is from the buyer as they can buy more for the same amount of money.
Substitutability - Answer- The more substitutions a good has, the more elastic it is.
Proportion of Income - Answer- The greater the proportion of income spent on a good,
the greater the price elasticity of demand for it.
, Luxuries vs Necessities - Answer- The more that a good is considered a luxury than a
necessity, the greater is the price elasticity of demand.
Time - Answer- Product demand is more elastic the longer the period under
consideration.
The cross price elasticity of demand - Answer- Measure the effect of the change in one
good's price on the quantity demanded of the other good.
Consumer Sovereignty - Answer- The situation in an economy where the desires and
needs of a consumers control the output of consumers.
Other Things Equal - Answer- Most of the time, something will occur as a result of
something else. An example would be, the law of gravity states if you throw a brick out
of the window, it will fall to the ground, due to gravity, as long as nothing else changes.
Marginal Utility/Benefit - Answer- The additional satisfaction a consumer gains from
consuming one more unit of a good or service.
Production Possibility Curve - Answer- The amount attainable of 2 items, ceteris
paribus. An example would be how many rabbits can you catch in 3 hours, vs how
many berries you can pick in 3 hours.
Absolute Advantag - Answer- When a country is able to be more productive than others.
Comparative Advantage - Answer- When a country can operate at a lower opportunity
cost than another country.
Normal Good - Answer- Goods or services whose consumption rise when income
increased, and decrease with income decreases, price staying constant.
Inferior Good - Answer- Goods or services whose consumption falls when income
increases and rises when income decreases, price remaining constant.
Consumer Surplus - Answer- The difference between the maximum price a consumer is
willing to pay for a product and the actual price.
Producer Surplus - Answer- Anything earned above the minimum price you are willing
to sell for.
Law of Diminishing Marginal Utility - Answer- The idea that as you acquire an item more
and more, your desire for it weakens.
Total Utility - Answer- The amount of satisfaction or pleasure a person receives from a
good or service.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Scholarsstudyguide. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £10.64. You're not tied to anything after your purchase.
