Midterm 1 Material

Question 1

Positive Analysis

Answer 1

descriptive statements about the world as it stands

Question 2

Normative Analysis

Answer 2

describes what should or ought to be occurring in the economy

Question 3

Price Elasticity of Demand

Answer 3

Question 4

Income Elasticity of Demand

Answer 4

Question 5

Cross-Price Elasticity of Demand

Answer 5

Question 6

Income Elasticity of Demand for Inferior Goods

Answer 6

Income Elasticity of Demand is negative

Question 7

Income Elasticity of Demand for Normal Goods

Answer 7

Income Elasticity of Demand is positive

Question 8

Income Elasticity of Demand for Luxury Goods

Answer 8

Income Elasticity of Demand is greater than 1

Question 9

Cross- price elasticity of demand for complements

Answer 9

Cross-price elasticity is negative

Question 10

Cross- price elasticity of demand for substitutes

Answer 10

Cross-price elasticity is positive

Question 11

Consumer Surplus

Answer 11

The difference between the price a consumer is willing to pay and has to pay

Question 12

Producer Surplus

Answer 12

The difference between the price that a producer receives and is willing to sell for

Question 13

Tax incidence born by consumer

Answer 13

Question 14

Tax incidence born by producer

Answer 14

Question 15

Price of Subsidy

Answer 15

Question 16

Consumer Preferences Assumptions

Answer 16

1. Completeness and Rankability
2. More is better
3. Transitivity (logical consistency)
4. Convexity
5. Continuity

Question 17

Marginal Rate of Substitution

Answer 17

Question 18

Tangency Condition

Answer 18