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ECON1010 PRINCIPLES OF MICROECONOMICS STUDY EXAM QUESTIONS; GRADED A+
This section is the practice questions for econ that can help you think critically and augment your review for the econ exams.
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ECON1010 PRINCIPLES OFMICROECONOMICS STUDY EXAM
QUESTIONS 1
the study of how
households and firms
make decisions and how
they interact in markets - Microeconomics
the study of the nation's economy as a whole - Macroeconomics
whatever must be given up to obtain some item - Opportunity Cost
predicts the consequences of alternative actions, answering the questions "what is?" or
"what will be?" - Positive Economics
answers the question, what ought to be? Normative questions lie at the heart of policy
debates. - Normative Economics
the claim that, other things equal, the quantity supplied of a good rises when the price of
the good rises
there is a positive relationship between price and quantity of a good supplied - Law of
Supply
the claim that, other things equal, the quantity demanded of a good falls when the price
of the good rises
There is a negative relationship between price and quantity demanded - Law of
Demand
a situation in which the market price has reached the level at which quantity supplied
equals quantity demanded - Equilibrium
- Measures how responsive buyers are to price changes.
- Measures by what percent the quantity demanded changes in response to a 1% price
change - Price Elasticity of Supply
, - A measure of how responsive the demand of one good is to price changes of other
goods
- Measures the percentage change in quantity demanded that follows from a 1% price
rise in another good
- This is a positive for substitutes. If the price of Pepsi goes up, you buy more Coke
instead.
- It is a negative for complements. If the price of a printer rises, you buy fewer
cartridges. - Cross Price Elasticity of Demand
- Measures how responsive quantity demanded is to changes in income
- It measures the percent change in quantity demanded following a 1% rise in income
- This is positive for normal goods (such as restaurant meals)
- This is negative for inferior goods (such as ramen noodles) - Income Elasticity of
Demand
the equipment and structures used to produce goods and services - Capital
a graph of the relationship
between the price of a good and
the quantity supplied - Supply Curves
a graph of the relationship
between the price of a good and
the quantity demanded - Demand Curves
a situation in which quantity demanded is greater than quantity supplied - Shortages
a situation in which quantity supplied is greater than quantity demanded - Surpluses
two goods for which an increase in the price of one leads to an increase in the demand
for the other
Beef and chicken and shoes and sandals are both pairs of goods which are more likely
to be used in place of each other, instead of together. If the price of beef goes up, the
quantity demanded of chicken increases as people switch consumption to the cheaper
good. These goods are more likely to be considered substitutes. - Substitutes
two goods for which an increase in the price of one leads to a decrease in
the demand for the other
Shampoo and conditioner, tables and chairs, and wine and cheese are examples of
pairs of goods which are often consumed or used together. The cross-price elasticity of
each of these pairs is likely to be negative, and they are considered to be
complementary goods. - Complements
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