ECON 2150 CH 2 EXAM QUESTIONS AND ACCURATE SOLUTIONS
Why do prices vary so much? - ANSWER Changes in Supply and Demand conditions
affects pattern of prices
competitive markets - ANSWER are those with sellers and buyers that are small and
numerous enough that they take the market price as given when they decide how much
to buy and sell. sell homogenous material. No barriers for entering or exiting the market
as in No strict rules from government. buyers and sellers have perfect knowledge of
material and price.
Market demand function definition - ANSWER tells us that the quantity of a good all
consumers in the market are willing to buy is a function of various factors.
Market Demand Function formula - ANSWER Q^d = (Q,p,po, I, ...)
2 types of market demand - ANSWER Derived Demand, Direct Demand
Derived Demand - ANSWER The part of demand for a good that is derived from the
production and sale of other goods.
Direct Demand - ANSWER The part of demand for a good that comes from the desire of
buyers to directly consume the good itself.
Market demand curve definition - ANSWER plots the aggregate quantity of a good that
consumers are willing to buy at different prices, holding constant other demand drivers
such as prices of other goods, consumer income, quality.
Market demand curve formula - ANSWER Q^d = Q(p)
, law of demand - ANSWER states that the quantity of a good demanded decreases
when the price of this good increases.
Demand curve rule - ANSWER A move along the demand curve for a good can only be
triggered by a change in the price of that good. Any change in another factor that
affects the consumers' willingness to pay for the good results in a shift in the demand
curve for the good.
The Demand Curve shifts when - ANSWER factors other than own
price change, when there is a change in an exogenous variable.
If the change increases the willingness of consumers to acquire the good, the demand
curve shifts - ANSWER right, (if demand curve shift right can also say that it shifts right
and up) price of related good and consumer income price of substitutes.
If the change decreases the willingness of consumers to acquire the good, the demand
curve shifts - ANSWER left
Demand curve: we always graph P on ____ axis - ANSWER vertical
Demand curve: we always graph Q on ____ axis - ANSWER horizontal
Inverse demand - ANSWER If P is written as function of Q =a/b-1/bQ
Normal form of demand - ANSWER Q^d=100-2P
Inverse form of demand - ANSWER P=50-Q^d/2
Markets are defined by 3 - ANSWER commodity, geography, and time
Why do prices vary so much? - ANSWER Changes in Supply and Demand conditions
affects pattern of prices
competitive markets - ANSWER are those with sellers and buyers that are small and
numerous enough that they take the market price as given when they decide how much
to buy and sell. sell homogenous material. No barriers for entering or exiting the market
as in No strict rules from government. buyers and sellers have perfect knowledge of
material and price.
Market demand function definition - ANSWER tells us that the quantity of a good all
consumers in the market are willing to buy is a function of various factors.
Market Demand Function formula - ANSWER Q^d = (Q,p,po, I, ...)
2 types of market demand - ANSWER Derived Demand, Direct Demand
Derived Demand - ANSWER The part of demand for a good that is derived from the
production and sale of other goods.
Direct Demand - ANSWER The part of demand for a good that comes from the desire of
buyers to directly consume the good itself.
Market demand curve definition - ANSWER plots the aggregate quantity of a good that
consumers are willing to buy at different prices, holding constant other demand drivers
such as prices of other goods, consumer income, quality.
Market demand curve formula - ANSWER Q^d = Q(p)
, law of demand - ANSWER states that the quantity of a good demanded decreases
when the price of this good increases.
Demand curve rule - ANSWER A move along the demand curve for a good can only be
triggered by a change in the price of that good. Any change in another factor that
affects the consumers' willingness to pay for the good results in a shift in the demand
curve for the good.
The Demand Curve shifts when - ANSWER factors other than own
price change, when there is a change in an exogenous variable.
If the change increases the willingness of consumers to acquire the good, the demand
curve shifts - ANSWER right, (if demand curve shift right can also say that it shifts right
and up) price of related good and consumer income price of substitutes.
If the change decreases the willingness of consumers to acquire the good, the demand
curve shifts - ANSWER left
Demand curve: we always graph P on ____ axis - ANSWER vertical
Demand curve: we always graph Q on ____ axis - ANSWER horizontal
Inverse demand - ANSWER If P is written as function of Q =a/b-1/bQ
Normal form of demand - ANSWER Q^d=100-2P
Inverse form of demand - ANSWER P=50-Q^d/2
Markets are defined by 3 - ANSWER commodity, geography, and time
