Unit 2 Test Review

1
Unit 2 Test Review

• Chapters 4, 5, and 6, and 7

2
Essay Questions

• Explain the Principal of Diminishing Marginal
  Utility (Page 93)
• Choose determinants of supply. Label them and
  explain them using examples.
• If a company produces gadgets, how would they
  deal with the problems caused by a surplus of the
  product. How will the market react to the
  situation. (Ch. 6, Sec. 2)

3
Essay Questionscontd

• Label, define, and give two examples of two types
  of monopolies. (Page 170)
• List five (5) determinants of demand.
• List five advantages of prices.
• Label the three (3) determinants of demand
  elasticity and explain how they effect
  elasticity. (Pages 106-107)

4
Essay questionsContd

• List the five conditions of perfect competition.
  (Page 164)
• List and explain the three (3) stages of
  production. (Page 125)
• Define externality and give an example of a
  negative and a positive externality. (Page
  175-176)

5
Externalities or Spillovers

• Some of the benefits or costs of production or
  consumption of a good spillover onto a third
  party external to the market transaction.

6
UNDERSTANDING SHIFTS OF THE DEMAND CURVEAct. 13,
Handout 7-1

• What causes a demand curve to shift?
• Changes in the prices of related goods
• Changes in income
• Changes in tastes
• Changes in expectations
• Number of buyers

7
Changes in the Prices of Related Goods

• Substitutes - Two goods are substitutes if a fall
  in the price of one of the goods makes consumers
  less willing to buy the other product.

• Butter/margarine
• Frozen yogurt/ice cream
• Hot dogs/hamburgers
• Movie tickets/video rentals

8
Changes in the Prices of Related Goods

• Complements - Two goods are complements if a fall
  in the price of one good makes people more
  willing to buy the other good.

• Hot dogs/hot dog buns
• Peanut butter/jelly
• Computers/software
• Automobiles/ gasoline

9
Shifts of the Supply Curve

• Changes in input prices
• Changes in technology.
• Changes in expectations.
• Prices of related goods produced.
• Number of suppliers.
• Study Activity 16.