Principles of Microeconomics (ECON 202) Midterm 2 Study Guide

These flashcards cover key concepts and formulas from Chapters 4, 5, and 6 of the Principles of Microeconomics course, necessary for the upcoming Midterm 2 exam.

The law of demand states that as the price of a good increases, the quantity demanded __________.

decreases

In a market, the condition for equilibrium is when __________.

Qd = Qs

The difference between quantity demanded (Qd) and demand (D) is that Qd refers to a __________ at a specific price, whereas D refers to the entire relationship between price and quantity.

specific quantity demanded

The __________ is a graphical representation that shows the relationship between price and the quantity of a good that suppliers are willing to sell.

supply curve

When the quantity supplied is greater than the quantity demanded, the market experiences a __________.

surplus

The budget constraint equation is given by __________.

p1 · q1 + p2 · q2 = B

Consumer surplus can be calculated as the __________ in willingness to pay minus the market price.

difference

The __________ elasticity of demand measures how the quantity demanded of one good responds to a change in the price of another good.

cross-price

The formula for calculating consumer optimization using the equal marginal principle is __________.

MB1/P1 = MB2/P2

The opportunity cost of good X can be defined as __________.

OCx = Px/Py

In the context of elasticity, if the absolute value of price elasticity of demand (ϵD) is greater than 1, demand is considered __________.

elastic

The calculation for consumer surplus in the market is easier to remember as __________.

the triangle area between the demand curve and the market price.

Income elasticity of demand measures the sensitivity of the quantity demanded to changes in __________.

income

The arc/midpoint formula for price elasticity of demand is __________.

ϵD = (Q2−Q1)/(Q1+Q2)/2 / (P2−P1)/(P1+P2)/2