My problem: If there are 5 different candies in a jar and a child wants to take out one or more candies, how many ways can this be done?
I said it is $^5C_1 -\; ^5C_0 = 5-1 = 4$ ways. The $-1$ for the unwanted case using this trick:
At least/At most = total number of combinations - unwanted cases
But according to my answer sheet, it said $2^5 -1$ is the answer.
So my question is that in what situations should I use exponents and what impact does it have?
Generally you use a power whenever you have several independent choices to make, and each choice has the same options.
Here, for each candy in the jar you can choose to take it, or not ($2$ options). All these decisions are independent, and there are $5$ of them, so there are $2^5$ possibilities for which candies you can take from the jar. However, this includes the case of taking none of them, so you need to subtract $1$ to get the answer you're looking for.