Economics - Unit 2 Test



Name: Period: Unit 2 Test (Ch. 5-7) Study GuideKnow the reasons for each of the shifts below.S1S1 SD-Supply decreased & price increased-Supply increased & price decreasedSD-demand increased & price increasedSD-demand decreased & decreasedSDD1D1What does the law of demand state? as prices increase, the quantity demanded decreases and vice versaWhat is the definition of demand? the amount of a good or service that consumers are willing and able to buy at all prices in a given periodWhat does the law of supply state? as prices increase, the quantity supplied increases and vice versaWhat is the definition of supply? the amount of a good or service that producers are willing and able to sell at all prices in a given periodThe price at which supply and demand are in balance is known as equilibrium.What is elasticity? The effect that PRICE has on QUANTITY demanded or supplied when PRICE changes.Usually for consumers a product or service is elastic if? Price has a larger effect on consumers. Products are usually wants.Usually for consumers a product or service is inelastic if? Price has a small effect on consumers. Products are usually necessities.When demand exceeds supply, shortage is created.When supply exceeds demand, a surplus is created.In what ways can the government exert control over supply and demand? Price controlsWhat is the formula of how to find a shortage? Quantity Demanded-Quantity Supplied What is the formula of how to find a surplus? Quantity Supplied-Quantity DemandedSSDraw and find a shortage & price ceiling Draw and find a surplus & price floor3794125819150016510013906500Min. Wage$ 10.00$8.00$1200RENT$750DDQSQDQDQS1005010050100-50=50 SURPLUS100-50=50 SHORTAGEWhat is the effect on the market of the government setting a price control of minimum wage? surplusWhat is the effect on the market of the government setting a price control of rent control? shortageWhat are the four questions/criteria used in determining the market structure of a specific market?Number of producersEase of entryFill in the Chart BelowSimilarity of producersControl over prices# of ProducersSimilarity of ProductsEase of EntryControl over PricesPerfect CompetitionLotsAlmost identicalVery easyNo controlMonopolistic CompetitionSomeSimilar, but differentiatedEasy, but there are some hurdlesSomeOligopolySmallAlmost similar, but differentNot very easyLarge amountMonopolyOneNo differenceVery DifficultComplete ControlGive an example of the following: ExamplePerfect CompetitionFarmers MarketMonopolistic CompetitionTaco BellOligopolySprintMonopolyLoudounWaterWhy doesn’t the market provide public goods? Cannot make a profitWhat is collusion? Collusion?-occurs when producers get together and make agreements on production levels and pricing.What is an externality? Side effects from consumer and producer interactions, positive & negativeExample of a positive externality: You paid attention in economics during high school and starting to save for retirement early. You invested in the stock market early and retired early. Example of a negative externality: some students acting up in class cause other classmates to have move seats because they are not mature enough to sit together ................
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