Midterm Exam Review Questions

Midterm Exam Review Questions - AP ECON 2300 Midterm Exam...

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AP ECON 2300 Midterm Exam Review Questions– F2012 Instructor: Dr. David K. Lee Please note that these listed questions are minimum (NOT Maximum) preparation for the midterm. Week 1: 1. Demand curve: Qd=100-2P, Supply curve: Qs=20+P and tax = $2 per unit on supply side. Compute the equilibrium before and after the tax and the amounts of consumer and producer burdens. 2. Explain income and substitution effects and how these effects contribute the downward sloping demand curve. 3. Explain the law of demand. Why does a demand curve slope downward? How is a market demand curve derived from individual demand curves? 4. Explain the law of supply. Why does the supply curve slope upward? How is the market supply curve derived from the supply curves of individual producers? 5. What are the determinants of demand? What happens to the demand curve when each of these determinants changes? Distinguish between a change in demand and a change in the quantity demanded, noting the cause(s) of each. 6. What effect will each of the following have on the demand for small automobiles such as the Mini Cooper and Smart car? a. Small automobiles become more fashionable. b. The price of large automobiles rises (with the price of small autos remaining the same). c. Income declines and small autos are an inferior good. d. Consumers anticipate the price of small autos will greatly come down in the near future.
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