ECN 212 STUDY GUIDE 2026 QUESTIONS AND ANSWERS
GRADED A+
✔✔state of (production) technology - ✔✔As time goes on, we get better and better at
using the resources around us efficiently.
As that efficiency increases, we can make goods by using fewer resources. Fewer
resources mean a lower cost. This causes supply to shift rightward (or outward).
✔✔Prices of Inputs - ✔✔When you require resources to produce your product, you care
very much about the price of these resources. As the price of any input resource
increases, your willingness to supply the final good at any given price decreases. This is
a leftward (or inward) shift of the supply curve.
✔✔Producer Expectations - ✔✔If firms expect the price of something to rise in the
future, they will be less willing to supply the good today at any given price. Supply will
shift to the left (inward).
✔✔Taxes and Subsidies - ✔✔If the government increases taxes on a good, the supply
available of that good at any given price levels will be lower than it was previously.
Supply will shift to the left (inward).
✔✔Number of Sellers - ✔✔If the number of firms willing to sell something increases, the
supply available of this good at any given price will be greater than it was before. Supply
will shift to the right (outward).
✔✔elastic supply - ✔✔the quantity supplied is sensitive to changes in price. Thus a
change in price leads to a relatively large change in quantity supplied.
✔✔inelastic supply - ✔✔the quantity supplied is not very sensitive to changes in price.
Thus, a change in price leads to only a relatively small change in quantity supplied.
✔✔equilibrium - ✔✔occurs at the intersection of supply and demand
✔✔economic efficiency - ✔✔1. All activities that provide individuals with more benefits
than costs must be undertaken.
2. No activities that provide benefits less than costs should be undertaken.
✔✔producer surplus - ✔✔Producer surplus is the difference between
the amount producers are willing to sell for
and the amount they do sell a good for (Producer surplus is the area below the the
actual price paid but above the supply curve)
, ✔✔consumer surplus - ✔✔Consumer surplus is the difference between the amount
consumers are willing to pay and the amount they have to pay for a good (Consumer
surplus is the area below the demand curve but above the actual price paid)
✔✔total surplus - ✔✔equals the total area for the consumer surplus plus the total area
for the producer surplus
✔✔positive externalities - ✔✔is a benefit that is enjoyed by a third-party as a result of an
economic transaction
✔✔negative externalities - ✔✔is a cost that is suffered by a third party as a result of an
economic transaction
✔✔price ceilings - ✔✔The government sets a price at which suppliers cannot sell
above. (Rent Control)
✔✔price floors - ✔✔The government sets a price at which buyers cannot pay below
(Minimum Wage)
✔✔black markets - ✔✔a market that operates outside the legal system
have higher incidence of defective products, higher profit rates, and greater use of
violence to resolve disputes
primary reasons for them:
evasion of a price control
evasion of a tax
legal prohibition on the production and exchange of a good
✔✔deadweight loss - ✔✔the loss of the gains from trade as a result of the imposition of
a tax
composed of losses to both buyers and sellers
✔✔shortages - ✔✔is a situation in which the quantity demanded is greater than the
quantity supplied.
✔✔surpluses - ✔✔is a situation in which the quantity supplied is greater than the
quantity demanded.
✔✔statutory tax incidence - ✔✔the legal assignment of who pays a tax
-the actual burden does not depend on who legally pays the tax
GRADED A+
✔✔state of (production) technology - ✔✔As time goes on, we get better and better at
using the resources around us efficiently.
As that efficiency increases, we can make goods by using fewer resources. Fewer
resources mean a lower cost. This causes supply to shift rightward (or outward).
✔✔Prices of Inputs - ✔✔When you require resources to produce your product, you care
very much about the price of these resources. As the price of any input resource
increases, your willingness to supply the final good at any given price decreases. This is
a leftward (or inward) shift of the supply curve.
✔✔Producer Expectations - ✔✔If firms expect the price of something to rise in the
future, they will be less willing to supply the good today at any given price. Supply will
shift to the left (inward).
✔✔Taxes and Subsidies - ✔✔If the government increases taxes on a good, the supply
available of that good at any given price levels will be lower than it was previously.
Supply will shift to the left (inward).
✔✔Number of Sellers - ✔✔If the number of firms willing to sell something increases, the
supply available of this good at any given price will be greater than it was before. Supply
will shift to the right (outward).
✔✔elastic supply - ✔✔the quantity supplied is sensitive to changes in price. Thus a
change in price leads to a relatively large change in quantity supplied.
✔✔inelastic supply - ✔✔the quantity supplied is not very sensitive to changes in price.
Thus, a change in price leads to only a relatively small change in quantity supplied.
✔✔equilibrium - ✔✔occurs at the intersection of supply and demand
✔✔economic efficiency - ✔✔1. All activities that provide individuals with more benefits
than costs must be undertaken.
2. No activities that provide benefits less than costs should be undertaken.
✔✔producer surplus - ✔✔Producer surplus is the difference between
the amount producers are willing to sell for
and the amount they do sell a good for (Producer surplus is the area below the the
actual price paid but above the supply curve)
, ✔✔consumer surplus - ✔✔Consumer surplus is the difference between the amount
consumers are willing to pay and the amount they have to pay for a good (Consumer
surplus is the area below the demand curve but above the actual price paid)
✔✔total surplus - ✔✔equals the total area for the consumer surplus plus the total area
for the producer surplus
✔✔positive externalities - ✔✔is a benefit that is enjoyed by a third-party as a result of an
economic transaction
✔✔negative externalities - ✔✔is a cost that is suffered by a third party as a result of an
economic transaction
✔✔price ceilings - ✔✔The government sets a price at which suppliers cannot sell
above. (Rent Control)
✔✔price floors - ✔✔The government sets a price at which buyers cannot pay below
(Minimum Wage)
✔✔black markets - ✔✔a market that operates outside the legal system
have higher incidence of defective products, higher profit rates, and greater use of
violence to resolve disputes
primary reasons for them:
evasion of a price control
evasion of a tax
legal prohibition on the production and exchange of a good
✔✔deadweight loss - ✔✔the loss of the gains from trade as a result of the imposition of
a tax
composed of losses to both buyers and sellers
✔✔shortages - ✔✔is a situation in which the quantity demanded is greater than the
quantity supplied.
✔✔surpluses - ✔✔is a situation in which the quantity supplied is greater than the
quantity demanded.
✔✔statutory tax incidence - ✔✔the legal assignment of who pays a tax
-the actual burden does not depend on who legally pays the tax
