Economics 202 Study questions Unit # 2

Chapters 3, 4, and 19.

1) Define demand and describe the factors that influence the demand for some particular good.

2) Develop a demand schedule and demand curve as tools to visualize the relationship between the price of a good and the quantity demanded of that good.

3) What is the law of demand?

4) To understand the law of demand, examine the relationship between the price that we are willing to pay for a good and the marginal benefits that one would anticipate receiving from the consumption of a particular good.

5) What is the law of diminishing marginal utility (benefits) and the importance that principle has in influencing the law of demand?

6) What is consumer surplus? How can it be measured? How can it be visualized using supply and demand curves?

7) What is the substitution effect? Develop and explain an example of the substitution effect.

8) What is the income effect? Develop and explain an example of the income effect.

9) What is meant by price elasticity of demand?

10) Examine five price elasticity situations and describe the price elasticity coefficients in each case.

11) What is the total revenue (expenditure) test for elasticity? Discuss the implications of this test for the pricing policy of firms.

12) What causes the demand for a good to be more price elastic or price inelastic?

13) What is the difference between a change in demand and a change in the quantity demanded? What causes each?

14) Detail several different things that cause a change in demand.

15) What is meant by income elasticity of demand? Describe what different income elasticity numbers imply about goods?

16) Define supply and describe the factors that influence the supply of a particular good.

17) What is the law of supply? Explain the reason for this law.

18) What is the difference between a change in supply and a change in the quantity supplied? What causes each? Explain.

19) Use supply and demand curves to demonstrate equilibrium price and output.

20) What is the difference between a short-run equilibrium and a long-run equilibrium? Explain using supply and demand curves.

21) How do changes in supply and demand affect short run equilibrium?

22) Describe the coordination and allocation functions of markets.

23) How do price ceilings and floors distort the market process?

24) Describe how the incidence of a tax affects market equilibrium