ECON 2113 Midterm: ECON 2113 Exam 2 study guide

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ECON 2113
Dr.Vera Tabakova

How to prepare for the second exam? (Chapters 4, 5, and 6) 1. Learnunderstandapply the definitions: 1. Elasticity: responsiveness of buyers and sellers to changes in market conditions 2. Price elasticity of demand: measure of responsiveness of quantity demanded to a change in price a. Elastic demand (responsivesensitive): quantity demanded changes significantly as the result of the price change b. Inelastic demand (unresponsiveinsensitive): quantity demanded changes a small amount as the result of the price change 3. Income elasticity of demand: responsiveness of the change in quantity purchased as a result of a change in income; can be positivenegative depending on the good 4. Cross price elasticity of demand: measures the responsiveness of the quantity demanded of one good to a change in the price of another good 5. Price elasticity of supply:measure of the responsiveness of the quantity supplied to a change in price 6. Price controls: attempt to setmanipulate prices through government involvement in the market 7. Price ceiling: legally estab. maximum price for a goodservice a. Minimum wage above equilibrium wage = surplus of labor b. Nonbinding minimum wage = no effect on market wage 8. Price floor: legally estab. minimum price for a goodservice a. Unintended consequences include surpluses, black markets, and artificial attempts to bring the market back into balance 9. Black market: illegal markets that arise when price controls are in place 10. Price gouging laws: laws that place a temporary ceiling on prices, usually after a natural disaster or emergency 11. Welfare economics: the study of how the allocation of resoures affects economic wellbeing 12. Consumer surplus: the difference bt willingness to pay for a good and the price actually paif to get the good 13. Willingness to pay: the maximum price a consumer will pay for a good 14. Producer surplus: the difference bt willingness to sell a good and the price actually received for that good
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