Econ 211 Final Exam With Correct Answers
Real Price - ANSWER Adjusted for inflation
Nominal price - ANSWER Unadjusted for inflation
Endogenous Variables - ANSWER Price, Qsupply, Qdemand. Characterized by movements along a curve
Exogenous Variables - ANSWER Technology, costs of production, preferences, HHI. Characterized by a
shift of the curve.
Market Mechanism - ANSWER tendency in a free market for price to change until the market clears.
(Qs=Qd)
Surplus - ANSWER Qs > Qd
Shortage - ANSWER Qs < Qd
Tax burden on buyers - ANSWER When demand is inelastic relative to supply
Tax burden on sellers - ANSWER When demand is elastic relative to supply
Infinitely elastic demand - ANSWER consumers buy as much as they can at a given price, but for a
higher price, demand drops to zero. At a lower price, demand increases without limit
Income Elasticity - ANSWER (I x Change in Q)/ (Q x Change in I)
Substitutes - ANSWER Positive elasticity
Complements - ANSWER Negative elasticity
, Cross Price Elasticity - ANSWER How an increase in price of one good affects the demand for another
good
Price elastic - ANSWER E > 1
Price Inelastic - ANSWER E < 1
Normal Goods - ANSWER Income inelastic
Luxury Goods - ANSWER Income elastic
Inferior Goods - ANSWER Income Inelastic
Market basket - ANSWER list with specific quantities of one or more goods
Budget Constraints - ANSWER contraints that consumers face as a result of limited incomes
Equation of Budget Line - ANSWER Px(X) + Py(Y)= I
Slope of budget line - ANSWER -(Px/Py)
Consumer preferences - ANSWER the ordering of alternatives which maximizes the consumers
satisfaction
Completeness - ANSWER consumers can compare and rank all possible market baskets
Transitivity - ANSWER I3 > I2 > I1, so I3 > I1
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