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ECON 110- Final Exam Guide - Comprehensive Notes for the exam ( 59 pages long!)Premium

59 pages163 viewsFall 2017

Department
Economics
Course Code
ECON 110
Professor
Michael Frederick Barber
Study Guide
Final

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Queen's
ECON 110
Final EXAM
STUDY GUIDE
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Econ Course Materials:
-Can purchase older textbook (Ragan, Christopher T. S., Microeconomics and
Macroeconomics 15th Canadian Edition)
-Subscription for MyEconLab (homework here, due Sunday nights)
-Pearson Catalytics (code available from onQ, link on course page)
-MobLab $12
Economic Issues and Concepts
1. People face trade-offs because of their limited resources (land, labour,
capital) and unlimited wants. Economics is essentially the study of how to
use scarce resources to satisfy human wants, and how people make these
decisions.
2. The opportunity cost of something is what you give up in order to obtain it.
3. Incentives are things that motivate you to act, and people really respond to
incentives. They can be positive (promotion, financial reward, etc) or they
can be negative (failing class, fines, etc).
4. Marginal Thinking: rational people think at the margin, meaning they
evaluate whether the benefit of one more unit of something is greater than
the cost.
5. Trade Creates Value
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September 19th, 2017
ECON 111 Gains from Trade
Today we’ll be discussing…
1. Changes in tech and how they affect PPB
2. Specialization
3. Trade (examples)
4. Comparative advantage & absolute advantage
5. Terms of trade
1. How To Impact PPB
To increase our PPB, we can improve our technology or increase our resources.
EX. Production of maple syrup falls on y-axis, and poutine on x-axis.
If we increase our technology to produce poutine, the x intercept will move
further to the right. Similarly, if we increase our technology to produce maple
syrup, the y intercept will shift up.
If we increase our resources, both x and y intercepts will move positively in their
respective directions.
To increase our PPB, we can also engage in specialization and trade.
EX. There are two goods, pizza and wings, and two people, Deborah and Mike.
Daily Production Possibility:
Opportunity Costs:
Without trade (autarky), they have to consume only what they produce. Deborah
could produce 60 pizzas and no wings, 120 wings and no pizzas, or 40 of each.
Mike could product 24 pizzas and no wings, 72 wings and no pizza, or 18 of each.
However, they could each specialize in what they have a lower opportunity cost
in. Therefore, Deborah will produce 60 pizzas and Mike will produce 72 wings,
and they can trade. For example, Deborah may trade 19 pizzas for 47 wings,
Wings
Pizza
Deborah
120
60
Mike
72
24
1 Wing
1 Pizza
Deborah
1/2 Pizza
2 Wings
Mike
1/3 Pizza
3 Wings
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