Econ 1014 Exam 2 Study Guide

# Suppose that the price of good x has just increased

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1) Suppose that the price of good x has just increased, and as a result you observe a decrease in the demand for good y. From this, you would be able to conclude that: a) Good y is a normal good b) Good y is an inferior good c) Goods x and y are complements d) Goods x and y are substitutes e) Consumers of good y are price elastic 2) Suppose the cross-price elasticity of demand between skilled workers and unskilled workers is equal to +2. From this information, we can conclude that a 10% increase in the price of unskilled workers will result in: Unit 3 Section 1: The Free Marker is the Most Efficient 1) If demand for a product is perfectly price elastic, then we can predict with certainty that at the market equilibrium outcome,

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2) When economists use the term “consumer surplus,” they are referring to: Unit 3 Section 2: Price Floors 1) Suppose the government decides to combat low wages by increasing the minimum wage. If the new minimum wage is binding and assuming that both workers and firms are responsive to changes in the price of labor, we can predict that: a) Society will suffer a deadweight loss because fewer than the optimal number of workers will be employed b) More workers will be hired c) Fewer workers will want to work d) Society will experience an increase in efficiency because surplus will be transferred from rich firms to poor workers e) None of the above 2) “Deadweight Loss” is an economic tool used to measure:
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