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ECN 102- Midterm Exam Guide - Comprehensive Notes for the exam ( 92 pages long!)


Department
E-Business Marketing
Course Code
ECN 102
Professor
All
Study Guide
Midterm

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Humber
ECN 102
MIDTERM EXAM
STUDY GUIDE

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ECON 1000 TEST 1: Chapter 1-6
Chapter 2: The Economic Problem
production possibilities frontier (PPF): is the boundary between those combinations of goods and
services that can be produced and those that cannot.
production efficiency: cannot produce more of one good without producing less of some other good.
marginal benefit curve: shows the relationship between the marginal benefit of a good and the quantity
of that good consumed.
allocative efficiency: When we cannot produce more of any one good without giving up some other
good that we value more highly.
economic growth: The expansion of production possibilitiesan increase in the standard of living
Two key factors influence economic growth:
Technological change
Capital accumulation
Technological change: is the development of new goods and of better ways of producing goods and
services.
Capital accumulation: is the growth of capital resources, which includes human capital.
comparative advantage: in an activity if that person can perform the activity at a lower opportunity cost
than anyone else.
absolute advantage: if that person is more productive than others.
Economic Coordination
Firm: is an economic unit that hires factors of production and organizes those factors to produce
and sell goods and services.
Market: is any arrangement that enables buyers and sellers to get information and do business
with each other.
Property rights: are the social arrangements that govern ownership, use, and disposal of
resources, goods or services.
Money: is any commodity or token that is generally acceptable as a means of payment.
Chapter 3: Demand and Supply
Market: is any arrangement that enables buyers and sellers to get information and do business with
each other.
competitive market: is a market that has many buyers and many sellers so no single buyer or seller can
influence the price.
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money price: of a good is the amount of money needed to buy it.
relative price of a good: the ratio of its money price to the money price of the next best alternative
goodis its opportunity cost.
If you demand something: You Want it, can afford it, and Have made a definite plan to buy it.
quantity demanded: Amount consumers plan to buy, and at a particular price.
law of demand states: Other things remaining the same, the higher the price of a good, the smaller is
the quantity demanded; and … the lower the price of a good, the larger is the quantity demanded.
Why does a change in the price change the quantity demanded?
Two reasons:
Substitution effect: When the relative price (opportunity cost) of a good or service rises, people
seek substitutes for it, so the quantity demanded of the good or service decreases.
Income effect: the price of a good or service rises relative to income, people cannot afford all
the things they previously bought, so the quantity demanded of the good or service decreases.
Demand: the entire relationship between the price of the good and quantity demanded of the good.
demand curve: shows the relationship between the quantity demanded of a good and its price when all
other influences on consumers’ planned purchases remain the same.
change in demand: When some influence on buying plans other than the price of the good changes.
When demand increases, the demand curve shifts rightward.
When demand decreases, the demand curve shifts leftward.
Six main factors that change demand are:
The prices of related goods
o Substitute: is a good that can be used in place of another good.
o Complement: is a good that is used in conjunction with another good.
Expected future prices
o If the price of a good is expected to rise in the future, current demand for the good
increases and the demand curve shifts rightward
Income
o normal good: is one for which demand increases as income increases.
o inferior good: is a good for which demand decreases as income increases.
Expected future income and credit
o When income is expected to increase in the future or when credit is easy to obtain, the
demand might increase now.
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