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Study Guide

[ECON 1B03] - Final Exam Guide - Ultimate 36 pages long Study Guide!


Department
Economics
Course Code
ECON 1B03
Professor
Hannah Holmes
Study Guide
Final

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McMaster
ECON 1B03
FINAL EXAM
STUDY GUIDE

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Economy - study of how society allocated scarce resources to satisfy everyone's unlimited wants
Scarcity - Means that society has limited resources and therefore cannot produce all the goods and services people wish
to have
Micro economy - focuses on individual parts of economy
Market economy - allocating resources through the decisions made by firms and households
Government has no say
Economic issues involves individual choices
Economic Rationality - using information to make the best decisions to achieve ones objective
Asymmetrical information - there is always someone know knows more about something than someone else
Resource - anything that can be used to male something
Called factor or production, or inputs
4 big resources - labor, land, capital, and euntrepounourship
Full time school vs Full time work
Opportunity Cost - Most of the time to get one thing, you will have to give up something
Explicit Cost - Something you could get a receipt for, tuition or some cost
Implicit Cost - Soethig you aot get a reeipt for, suh as losig a jo to oe to shool, you did’t get paid
yet but you let that job go so Implicit
Forgone Alternative
Best forgone alternative(lost wage at a job) + money spent on tuition, books and housing
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Opportunity Cost for coming to Mac
Marginal Thinking - Small incremental change
Economically rational thinkers make decisions at marginal
Ex. If I buy ONE more orange, how will my total satisfaction with my purchase change?
"The invisible hand"
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We create the demands for goods and service that compels others to supply those goods in the most efficient
manner
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The invisible hand brings buyer and sellers together so that both benefit
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Adam Smith - Father of Economics
Efficiency - Using our resources the best way possible to meet needs
Involves economic decisions
Free markets lead to efficiency - with no intervention with outside sources such as government
Involves political decisions
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Equity - A fair allocation/distribution of resources
When not everything can change, Firms cannot adjust their business plans to any great degree; consumers
cant change there buying strategies to great degree
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Short Run - Present
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Long Run - Future
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Time periods
Module 1.1
January 23, 2017
12:28 PM
Microeconomics Page 1
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Everything can change, Firms and consumer can react quickly to economic events
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Long Run - Future
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Positive Statements - Fact, High interest rates reduce demand for mortgages
Normative Statements - statements about what should be; options and value judgement
Positive vs. Normative Statements
Used to make predictions about potential economic outcomes
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Involves making assumptions based on theory
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We use models to show how economy works
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Economic Models
Microeconomics Page 2
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