Download Study Guide for First Midterm

Econ 210
Prof. Mitchell
STUDY GUIDE CHAPTERS 1-5, 18
These questions are for your use in studying for the midterm exam. Your exam will not be primarily
definitions. It will require thought to answer most of the questions. Any graphs you draw to answer
questions should be properly labeled, including labels on the axes. Practice drawing the graphs we have
studied.
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What are the subjects covered by microeconomics and macroeconomics?
What is the difference between causation and correlation?
What is the difference between normative and positive economics? Can you think of examples?
What are the three questions all economies must answer?
What is the post hoc, ergo propter hoc fallacy?
What does opportunity cost mean?
What is comparative advantage?
What is specialization of labor? Give an example.
What is division of labor? Give an example.
Know what a PPF is, what it means, and how to use one. What things may change the PPF?
Why does the PPF bow out?
How is opportunity cost represented on a PPF?
What is the difference between a market and a centrally-planned economy?
Define quantity demanded.
What does the demand curve represent?
Why do economists use both the terms quantity demanded and demand? What is the difference?
Practice using the terms correctly!
What variables determine the quantity demanded?
What does ceteris paribus mean?
Know what changes shift the demand curve and what changes move along the demand curve.
What is a normal good?
What is an inferior good? Give an example.
What are substitutes and complements?
What variables are measured on the axes when drawing a demand curve?
Be able to depict an increase or a decrease in demand on a graph.
What does the supply curve represent?
Why do economists use both the terms quantity supplied and supply? What is the difference?
Practice using the terms correctly!
What determines the quantity supplied?
Know what changes shift the supply curve and what changes move along the supply curve.
What variables are on the axes when drawing a supply curve?
Be able to depict an increase or a decrease in supply on a graph.
Be able to transfer information from a demand/supply schedule onto a graph.
What changes lead to a shift in supply?
If one good is a substitute for another from a consumer’s perspective, will that good also be a
substitute from the producer’s perspective?
If the price of an input falls, what happens to supply? Does anything happen to demand?
What is the equilibrium condition?
Be able to find the equilibrium price and quantity on a graph.
What are excess demand, excess supply, shortages, and surpluses?
Be able to prove why the equilibrium price is the equilibrium price.
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39. Be able to take "story problems" and translate them into demand and supply graphs to determine
changes in the equilibrium price and quantity.
40. What are price floors and price ceilings?
41. What is the effect of a binding price floor? Ceiling?
42. Be able to graph the effects of price controls.
43. What effect does a price floor have on the quantity exchanged? Ceiling?
44. Who benefits and who loses and why because of a binding minimum wage law?
45. What is a non-binding price floor? Ceiling?
46. Why can a binding minimum wage law make discrimination (against any group) easier?
47. Define the price elasticity of demand. Explain in your own words what it means.
48. What is the formula for the price elasticity of demand? Practice calculating it.
49. Be able to use elasticities.
50. Know what inelastic, unit elastic and elastic means numerically and in words.
51. How does total revenue change when price changes? (Depends on the elasticity.)
52. How does elasticity depend on the shape of the demand curve? How does elasticity vary along a
straight-line demand curve?
53. Be able to compare the elasticities of two straight-line demand curves passing through the same point.
54. What factors influence the elasticity of demand? Be able to give examples.
55. What do perfectly elastic and perfectly inelastic demand curves look like?
56. Which is more elastic, a short-run demand curve or a long-run demand curve?
57. What is the formula and what is the interpretation of income elasticity of demand? Be able to
calculate it.
58. Define and explain the price elasticity of supply. Be able to calculate it.
59. What do perfectly elastic and perfectly inelastic supply curves look like?
60. Define the income elasticity of demand. What is the formula?
61. What does it mean when the income elasticity of demand is positive versus negative?
62. Does the income elasticity of demand for a good change as average household income changes?
63. Be able to show consumption, production and tax revenue on a graph when an excise tax is being
used.
64. What determines how much of an excise tax is passed on to consumers?
65. Do you have any idea why cigarettes and alcohol are subject to excise taxes even though the taxes
don't seem to reduce smoking or drinking very much?
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