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ECO 201 Exam 2 Study Guide 30 Questions with Verified Answers,100% CORRECT, Exams of Economics

ECO 201 Exam 2 Study Guide 30 Questions with Verified Answers (1) Demand - CORRECT ANSWER the quantity of a product that people are *willing* and *able* to buy during a specific period (2) Law of Demand - CORRECT ANSWER the *quantity* of a product *inversely* related to the *price* of the product, other things held constant (2) 'Other Things Held Constant ' - CORRECT ANSWER - indicates the effect of one economic variable on another, holding constant all other variables that may affect the second variable. -the dominant relationship is between quantity and demand, but there are other factors that go into quantity, which is ignored for now. (3) Shift factors of Demand - CORRECT ANSWER -the consumers taste and preferences ~the income of the customer -number of buyers ~prices of related goods -consumer expectations -taxes and substitutes (4) Substitute Goods - CORRECT ANSWER -Goods that are perceived as similar or comparable *

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ECO 201 Exam 2 Study Guide 30 Questions with Verified

Answers

(1) Demand - CORRECT ANSWER the quantity of a product that people are willing and able to buy during a specific period (2) Law of Demand - CORRECT ANSWER the quantity of a product inversely related to the price of the product, other things held constant (2) 'Other Things Held Constant ' - CORRECT ANSWER - indicates the effect of one economic variable on another, holding constant all other variables that may affect the second variable. -the dominant relationship is between quantity and demand, but there are other factors that go into quantity, which is ignored for now. (3) Shift factors of Demand - CORRECT ANSWER -the consumers taste and preferences ~the income of the customer -number of buyers ~prices of related goods -consumer expectations -taxes and substitutes (4) Substitute Goods - CORRECT ANSWER -Goods that are perceived as similar or comparable -When the price of one and the demand for the other move in the same direction (ex. tea and coffee) (4) Complementary Goods - CORRECT ANSWER -Goods that generate satisfaction when consumed together -The price of one and the demand of the other move in the opposite direction

(5) Movement Along the Demand Curve - CORRECT ANSWER This will indicate a change in price of a product (different at different prices) (5) Shift of the Demand Curve - CORRECT ANSWER this will indicate a change in one or more of the determinants (shift factors) of demand (6) Quantity Demanded - CORRECT ANSWER This refers to a point on the demand curve. Each point has a different price quantity combination. (6) Demand (Demand Curve) - CORRECT ANSWER This refers to the entire demand for a product (7) When price decreases, why will the market increase? - CORRECT ANSWER - new customers will demand the product

  • customers who are already buying will buy more Market Demand - CORRECT ANSWER the horizontal summation of individual buyers (8) Law of Supply - CORRECT ANSWER A positive relationship between price and quantity supplied. When prices increase, quantity supplied will also increase (other things held constant). Supply - CORRECT ANSWER a curve showing the amounts of a product a producer is willing and able to supply at different prices during a specific period. Shift Factors of Supply - CORRECT ANSWER -Prices of resources -Technology -Prices of other goods -Number of sellers -Producers expectations (9) Market Equilibrium - CORRECT ANSWER This occurs at the price quantity combination where the quantity demanded and quantity supplied are equal. (10) Market Surplus - CORRECT ANSWER -excess supply

-the excess of the quantity supplied over the quantity demanded when the price is above equilibrium (10) Market Shortage - CORRECT ANSWER -excess demand -the excess of quantity demanded over the quantity supplied when the price is below equilibrium (11) The three laws of supply and demand - CORRECT ANSWER 1. When quantity demanded is greater than quantity supplied, prices will increase (shortage) when quantity supplied is greater than quantity demanded prices will fall (surplus)

  1. In a market where there is excess supply or excess demand there will be pressure on prices to rise or fall accordingly
  2. When quantity supplied equals quantity demanded (market equilibrium) price has no tendency to change (13) Invisible Hand - CORRECT ANSWER This invisible force influences market prices by economic forces of demand and supply (13) Invisible Handshake - CORRECT ANSWER This invisible force influences market prices by social forces (13) Invisible Foot - CORRECT ANSWER This invisible force influences market prices by political forces (14) Say's Law - CORRECT ANSWER - Production is the source of demand.
  • When an individual produces a product or service, he or she gets paid for that work, and is then able to use that pay to demand other goods and services. (1) National Income Flow Chart - CORRECT ANSWER A circular flow of resources, goods, and income. (1A) Factor Market - CORRECT ANSWER Factors of production from households and payment from firms (1A) Product Market - CORRECT ANSWER Goods and services from firms and personal expenditure from households

(1B) Leakages - CORRECT ANSWER Taxes (T) + Savings (S) + Imports (IM) =? (1B) Injections - CORRECT ANSWER Government (G) + Investment (I) + Exports (EX) =? (1C) Private Sector - CORRECT ANSWER The part of the economy that is not state controlled, and is run by individuals and companies for profit. (1C) Public Sector - CORRECT ANSWER The part of the economy concerned with providing basic government services.