ECON 102 Midterm

Explain the difference between decrease in supply and a decrease in quantity supplied.

- A decrease in supply is illustrated by a leftward shift of the whole supply curve, because supply is the entire relationship between quantities supplied and prices. A change in supply is caused by factors such as change in costs of inputs or change in technology. - A decrease in quantity supplied is illustrated by a movement along the given supply curve because quantity supplied is the amount supplied at a specific price. A change in quantity supplied is caused by a change in the price of a good or service. For example, if price decreases, there will be a movement down the supply curve to a lower quantity supplied.

GDP deflator

= (nominal GDP/real GDP) x 100

GDP formula

GDP = Consumption + Investments + Government Purchases + Net Exports (exports - imports)

Gross Domestic Product (GDP)

GDP is the total value of all final goods and services produced for the market place within a country in a given period of time. Informal transactions, underground economy transactions, and intermediate transactions are not included in GDP.

Explain the difference between increase in demand and increase in quantity demanded.

- An increase in demand is illustrated by a rightward shift of the whole demand curve, because demand is the entire relationship between quantities demanded and prices. A change in demand is caused by factors other than change in price such as change in income or changes in the prices of substitute/complementary goods. - An increase in quantity demanded is illustrated by a movement along a given demand curve because quantity demanded is the amount demanded at a specific price. A change in quantity demanded is caused by a change in the price of a good or service. For example, if price increases, there will be a movement up the demand curve to a lower quantity demanded.

Consumer Price Index (CPI)

= (base year quantity x current year price / base year quantity x base year price) x 100