ECO 2030. Principles of Economics-Price Theory

Exam #2 Study Guide

The exam is worth 100 points.

• Practice test #1
• Practice test #2 (only worry about 1-19)
• Practice test #3

Chapter 4

• Key words: factors that change demand (shift the curve), factors that change supply (shift the curve), s changes in market equilibrium (due to changes in demand and supply)

Chapter 5

• Key words: price elasticity of demand, determinants of elasticity, elastic, inelastic, elasticity and total revenue, cross price elasticity of demand, income elasticity, (labor) supply elasticity (covered with chapter 8)
• Problems and applications: Page 110 #1 (a, b, c), #4 (a), Page 111 problem #8 (a, b)
• Answer Key (PDF)

Chapter 7

• Key words: market efficiency, willingness to pay, consumer surplus, producer surplus, willingness to accept, opportunity cost of production, welfare analysis, total surplus (chapter 6: price ceiling, price floor)
• Problems and applications (p. 156): #3, #4, #5
• Answer Key (PDF)

Chapter 8

• Key words: burden of a tax (i.e., who pays?), effects of a tax on market price and quantity, deadweight loss, deadweight loss and demand elasticity, taxation and welfare (i.e., changes in consumer and producer surplus)
• Problems and applications (p. 173): #1 (a, b)
• Answer Key (PDF)

Chapter 9

• Key words: comparative advantage, winners and losers from trade, gains from trade, trade and welfare, tariffs, quotas, protectionism and welfare
• Problems and applications (pp. 196-197): #1, #4
• Answer Key (PDF)

Chapter 18

• Key words: labor demand (marginal product of labor, diminishing marginal product, value of the marginal product), labor supply, (labor-leisure tradeoff), supply elasticity and tax incidence