ECO 232 Exam 1 Review Guide

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Unrelated

House plants and potato chips are

True

If consumers believe the price of tablet computers will increase in the future, this will cause the demand for tablet computers to decrease now

the supply curve for apples has shifted to the left

If in the market for apples the supply has decreased, then

the supply of bananas increased

If in the market for bananas the supply curve has shifted to the right, then

The supply curve will shift to the right.

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars?

a decrease in the quantity of beef jerky demanded

If the price of beef jerky rises, then the substitution effect due to the price change will cause

False

If the price of peaches, a substitute for plums, increases the demand for plums will decrease

increase the demand for game consoles.

If virtual reality headsets are considered substitutes for game consoles, an increase in the price of virtual reality headsets would, all else equal,

The supply curve shifts to the left.

In July, market analysts predict that the price of gold will rise in August. What happens in the gold market in July, holding everything else constant?

complements

Smartphones and smartphone apps are

income

The ________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.

the lower the price, the more of the good is bought

The law of demand states that

the maximum attainable combinations of two products that may be produced in a particular time period with available resources.

The production possibilities frontier shows

occurs when production is in coordinate with consumer preferences

What is allocative efficiency?

the study of how people make decisions considering their scarce resources

What is economics?

the next best alternative that must be given up

What is opportunity cost?

goods or service is produced at the lowest possible cost

What is productive efficiency?

unlimited wants and needs but limited resources

What is scarcity?

A change in technology

What is the first supply curve shifter?

income, population, preferences, prices of related goods, expectations of future prices

What shifts the demand curve?

input prices, technology, expectations, number of sellers

What shifts the supply curve?

the ability to produce more of a given product using a given amount of resources

absolute advantage

statement which describes how the world should be

normative statement

statement which describes the world as it is

positive statement

is a curve that shows the relationship between the price of a product and the quantity of the product supplied

A supply curve

False

An inferior good is a good for which the quantity demanded increases as the price decreases, holding everything else constant.

substitutes

Eyeglasses and contact lenses are

complements

Motorcycles and gasoline are

False

Peanut butter and jelly are complements. If the price of peanut butter increases, the demand for jelly will increase.

substitutes

Red wine and white wine are

Supply shift right; a lower equilibrium price and a higher equilibrium quantity

You are looking at the supply and demand for corn muffins. The price of corn decreases. On the graph you will see _____ and the result will be _____.

the ability to produce a good at a lower opportunity cost than another producer

comparative advantage


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