ECON 201Test questions and
answers well graded 100%
Normative Statement - ANS✅✅statement of belief or "What ought to be" , need to be supported
by positive statements
Positive Statement - ANS✅✅Statement that is either true or false. Can be wrong and still be a
positive statement
Theory - ANS✅✅Is useful in the absence of data. The strongest statement we can make in terms of
theory is that the evidence fails to disprove the theory. Cannot prove that a theory is true
Price - ANS✅✅Ratio at which two goods or services are exchanged. It is impossible to change only
one price.
Scarcity - ANS✅✅Not having enough of the things we find desirable to satisfy our desires
How do we compete - ANS✅✅Pay higher prices, get better jobs, wait in lines, cheat, lie, steal,
pursue aggression and violence. Individuals will chose the form of competition that is most beneficial
and least costly to them.
Three fundamental questions when organizing an economy - ANS✅✅What should we produce?
How should we produce?
For whom should we produce?
An economy - ANS✅✅A set of inter related production and consumption activities to allocate
resources.
Opportunity Cost - ANS✅✅the value of one activity compared to the value of the next best
alternative
What constrains consumption - ANS✅✅Income, price of goods, legality of consumption, cost of
maintaining the good, our health, etc.
, Equilibrium - ANS✅✅Qd = Qs there is no pressure on prices to change
Shortage - ANS✅✅Qd > Qs, upward pressure on prices
Surplus - ANS✅✅Qs > Qd, downward pressure on price
4 Behavioral Postulates - ANS✅✅1. People have preferences
2. More is preferred to less
3. People are willing to substitute
4. Marginal values are always decreasing
Value - ANS✅✅What one is willing to give up in order to attain something else
Intrinsic Value - ANS✅✅Value belonging naturally
Total Value - ANS✅✅The highest price you would pay for something, such as the max you would
pay for a full tank of gas
Marginal Value - ANS✅✅The max you would pay for one more unit of a good. How much you
would pay for one more gallon of gas
Diminishing marginal value - ANS✅✅The value of a good is decreasing as you acquire more of it
Optimal purchase rule - ANS✅✅A consumer will continue to purchase something until their
marginal value for a good is less than the price for the good
Consumer Surplus - ANS✅✅Total value of the consumers purchase in excess of the price of the
good.
Demand - ANS✅✅Scheduled quantity willing to buy at various prices.
A change in price leads to movement along the demand curve but a change in demand results in a
shift of the demand curve
answers well graded 100%
Normative Statement - ANS✅✅statement of belief or "What ought to be" , need to be supported
by positive statements
Positive Statement - ANS✅✅Statement that is either true or false. Can be wrong and still be a
positive statement
Theory - ANS✅✅Is useful in the absence of data. The strongest statement we can make in terms of
theory is that the evidence fails to disprove the theory. Cannot prove that a theory is true
Price - ANS✅✅Ratio at which two goods or services are exchanged. It is impossible to change only
one price.
Scarcity - ANS✅✅Not having enough of the things we find desirable to satisfy our desires
How do we compete - ANS✅✅Pay higher prices, get better jobs, wait in lines, cheat, lie, steal,
pursue aggression and violence. Individuals will chose the form of competition that is most beneficial
and least costly to them.
Three fundamental questions when organizing an economy - ANS✅✅What should we produce?
How should we produce?
For whom should we produce?
An economy - ANS✅✅A set of inter related production and consumption activities to allocate
resources.
Opportunity Cost - ANS✅✅the value of one activity compared to the value of the next best
alternative
What constrains consumption - ANS✅✅Income, price of goods, legality of consumption, cost of
maintaining the good, our health, etc.
, Equilibrium - ANS✅✅Qd = Qs there is no pressure on prices to change
Shortage - ANS✅✅Qd > Qs, upward pressure on prices
Surplus - ANS✅✅Qs > Qd, downward pressure on price
4 Behavioral Postulates - ANS✅✅1. People have preferences
2. More is preferred to less
3. People are willing to substitute
4. Marginal values are always decreasing
Value - ANS✅✅What one is willing to give up in order to attain something else
Intrinsic Value - ANS✅✅Value belonging naturally
Total Value - ANS✅✅The highest price you would pay for something, such as the max you would
pay for a full tank of gas
Marginal Value - ANS✅✅The max you would pay for one more unit of a good. How much you
would pay for one more gallon of gas
Diminishing marginal value - ANS✅✅The value of a good is decreasing as you acquire more of it
Optimal purchase rule - ANS✅✅A consumer will continue to purchase something until their
marginal value for a good is less than the price for the good
Consumer Surplus - ANS✅✅Total value of the consumers purchase in excess of the price of the
good.
Demand - ANS✅✅Scheduled quantity willing to buy at various prices.
A change in price leads to movement along the demand curve but a change in demand results in a
shift of the demand curve
