Midterm 1

Question 1

change in price of good

Answer 1

leads to movement along demand curve but not shift

Question 2

decrease in input price

Answer 2

increase in supply

Question 3

tech improvement

Answer 3

increase in supply

Question 4

increase in gov regulation

Answer 4

decrease in supply

Question 5

increase in # of firms

Answer 5

increase in supply

Question 6

excise tax

Answer 6

tax on each unit of output sold; shifts supply up by amount of tax

Question 7

ad-valorem

Answer 7

percentage tax; supply goes up by percentage

Question 8

surplus

Answer 8

Qs - Qd at specific price

Question 9

if surplus

Answer 9

sellers cut the price to reduce surplus

Question 10

shortage

Answer 10

Qd - Qs of specific price

Question 11

if shortage

Answer 11

raise price

Question 12

consumer expenditure

Answer 12

area below CS

Question 13

price ceiling must be

Answer 13

below equilibrium price

Question 14

non-binding price ceiling can become binding by

Answer 14

increasing demand and decreasing supply

Question 15

law of demand

Answer 15

as price falls demand rises

Question 16

to find inverse equation

Answer 16

switch variables and solve for y

Question 17

price floor must be

Answer 17

above equilibrium price

Question 18

if coefficient in front Py is -

Answer 18

they are complements

Question 19

if coefficient in front of I is -

Answer 19

the first good is inferior

Question 20

quantity restriction has same impact as

Answer 20

price floor

Question 21

a tax always

Answer 21

shrinks the market

Question 22

full economic price

Answer 22

quantity traded into demand function

Question 23

total cost to gov

Answer 23

surplus or shortage * price

Question 24

increase in PS due to new producers entering market

Answer 24

area of E

Question 25

increase in PS to producers already in market

Answer 25

area of D

Question 26

taxes on sellers

Answer 26

decrease equilibrium quantity, increase buyers price, decreases sellers received price

Question 27

CS with no tax

Answer 27

ABC

Question 28

CS with tax

Answer 28

A

Question 29

tax revenue

Answer 29

BD (tax * Q after tax)

Question 30

PS with no tax

Answer 30

DEF

Question 31

PS with tax

Answer 31

F

Question 32

tax reduces total surplus by

Answer 32

deadweight loss

Question 33

base of deadweight triangle

Answer 33

amount of per unit tax

Question 34

tax reduces CS by

Answer 34

BC

Question 35

tax reduces PS by

Answer 35

DE

Question 36

demand is inelastic when

Answer 36

elasticity is between 0 and 1

Question 37

if elastic firm

Answer 37

decrease price to increase rev

Question 38

%∆Qx

Answer 38

Q2-Q1/Q1

Question 39

%∆Px

Answer 39

P2-P1/P1

Question 40

if own price elasticity is positive

Answer 40

we have supply function

Question 41

if own price elasticity is negative

Answer 41

we have demand function

Question 42

if cross price elasticity is negative

Answer 42

goods x and y are complements

Question 43

if cross price elasticity is positive

Answer 43

goods are substitutes

Question 44

income elasticity is negative

Answer 44

inferior good

Question 45

income elasticity positive

Answer 45

normal good

Question 46

|E| > 1

Answer 46

demand is flat; slope is small

Question 47

|E|< 1

Answer 47

demand is steep; slope is big

Question 48

|E|=1

Answer 48

unitary demand is neither steep nor flat

Question 49

|E|= 0

Answer 49

perfectly inelastic; vertical demand

Question 50

|E|= infinity

Answer 50

perfectly elastic horizontal

Question 51

price elasticity is higher for

Answer 51

luxuries than necessities; narrowly defined goods than broad; long run

Question 52

∆Qx/∆Px

Answer 52

slope/# in front of Px