Ecs2601 Unit 1 - 5 Study Guide Questions And Correct Answers

Completely Inelastic {Ans: Ep = 0 Principle that consumers will buy a fixed quantity of goods no matter the price.}Marginal Cost {Ans: The cost of one additional unit.}Income Elasticity of Demand Formula {Ans: EI = (I/Q) x (ΔQ/ΔI)}Price Ceiling {Ans: Implementing a maximum price allowed as the market clearing price had been too high. This increases demand in excess and reduces supply as producer with higher output costs will produce less.}Inferior Good {Ans: Consumption falls as income increases. Negative Slope.}Consumer Behaviour {Ans: 1. Consumer Preferences 2. Budget Constraints 3. Consumer Choices}Price Consumption Curve {Ans: Curve tracing the utility maximizing combinations of two goods as the price of one changes.}Point Elasticity of Demand {Ans: The price at a specific point on the demand curve.}Budget Line {Ans: Graphical representation of limitations on behaviour by possible combinations of goods for which the total amount of money used equals to income.}Elasticity Definition {Ans: The percentage change in one variable resulting from a 1% increase in another.}Linear Demand {Ans: Ep = 1 (y=mx + c) The demand curve is in a straight line.}Perfect Complement {Ans: Two goods for which the MRS is zero