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Final

Microeconomics Exam Review Econ 110/111
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Department
Economics
Course
ECON 110
Professor
Ian James Cromb
Semester
Fall

Description
Econ 111 Exam Review Chapter 1 Chapter 2 Introduction Chapter 33 pgs 842855 Chapter 3 Chapter 4 Supply and Demand Chapter 5 Chapter 6 incl Appendix Household Behaviour Supplementary Chapter Other Household Decisions Chapter 7 Producer Theory Chapter 8 omit Appendix Chapter 9 Additional Topic from MyEconLab website The LongRun Industry Supply Curve Market Structures and Chapter 10 Efficiency Chapter 11 Chapter 12 Chapter 33 pgs 855866 Trade and Protectionism Chapter 34 Chapter 13 Factor MarketsChapter 1Economic Issues and Concepts Economya system in which scarce resources are allocated among competing uses Self interest is the foundation of economic order a free market is self organizingMain characteristics of market economies 1 self interestindividuals pursue their own self interest buying ad selling what seems best for them 2 Incentivessellers want to sell more when prices are high buyers want to buy more when prices are low 3 Market prices and Quantitiesare determined in the free markets in which wouldbe sellers compete to sell their products to wouldbe buyers 4 Institutionsall these activities are governed by a set of institutions largely created by governmentThe natures of private property and contractual obligations are defined by laws passed by legislations Economicsthe study of the use of scarce resources to satisfy unlimited human wants 3 basic questions 1 What gets produced and how MICRO 2 What is consumed and by whom MICRO 3 Why are resources sometimes left idleMACRO 4 Is productive capacity growing and how does this come about MACRO Factors of productionresources used to produce goods and services frequently divided into the basic categories of land labour and capital Goods are tangible commodities and services are intangible commodities Scarcity implies that choice must be made and making choices implies the existence of costsEverytime a choice is made opportunity costs are incurred Opportunity costthe cost of using resources for a certain purpose measured by the benefit given up by not using them in their best alternative use ie if resources that could have produced 20km of road are best used instead to produce one hospital then the opportunity cost of a hospital is 20 km of road Production Possibilities Boundarya curve showing which alternative combinations of commodities can be attained if all available resources are used efficiently it is the boundary between attainable and unattainable output combinationsscarcity is indicated by the unattainable combinations outside the boundary choice is indicated by the need to choose among the available alternative points along the boundaryopportunity cost is demonstrated by the negative slope of the boundaryPoints A B and C are attainable Point Y is unattainable unless there is an increase in technology Point X is inefficient the shape of the PPB implies that an increasing amount of product A must be given up to achieve equal successive increases in product BThis shape concave to origin indicated that the opp cost of either good increases as we increase the amount of it that is producedA straight line boundary would mean that the opp cost is constant this shape occurs because each factor of production is not equally useful in producing all goodsie land might be particularly well suited to growing wheat and as you shift more and more you might be using land that is more suited to the production of clothing so the extra amount of clothing that must be foregone rises and the opportunity cost of producing one good of wheat rises as more wheat is produced when an economy grows the PPB shifts outward and can produce more of both goods Resource allocationthe allocation of an economys scarce resources among alternative uses Microeconomicsthe study of the causes and consequences of the allocation of resources as it is affected by the workings of the price system Macroeconomicsthe study of the determination of economic aggregates such as total output the price level employment and growthconsumers and producers who are maximizers make marginal decisionswhether to buy or sell a little bit more or less of the many things that they buy and sellProduct marketa market in which products are sold by firms and bought by households Factor marketa market in which households sell and firms buy factors of production the red line shows the flow of goods and services and the blue line shows the payments made to purchase these Specialization of labourthe specialization of individual workers in the production of particular goods or servicesThe economys total production is greater when people specialize than when they all try to be selfsufficient Division of labourthe breaking up ofproduction process into a series of specialized tasks each done by a different workerspecialization within the production process of a particular product specialization must be accompanied by tradePeople who produce only one thing must trade most of it to obtain all the other things they want Barteran economic system in which goods and services are traded directly for other goods and servicesRequires a double coincidence of wants money facilitates specialization and trade Types of Economic Systems
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