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ECON_102 Final Exam Review (everything you need to know)

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ECON 102
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ECON 102 FINAL REVIEW PACKAGEChapter 1 What Is Economics Definition of EconomicsAll economic questions arise from scarcityChoices depend on incentivesconsequences that encouragediscourage actionsMicroeconomics choices of individuals and businessesMacroeconomics national and global economies Two Big Economic QuestionsHow do choices determine what how and for whom goods and services are produced and in what quantitiesHow can choices made in pursuit of selfinterest also promote social interestEfficiency is achieved when available resources are used to produce gods and services at the lowest costFactors of ProductionLandrentLabour includes human capitalwagesCapital machineryinterestEntrepreneurshipprofit Economic Way of ThinkingChoice is a tradeoffopportunity cost is the highestvalue alternative forgoneBig tradeoff between equality and efficiencyEconomic choices are made by comparing marginal benefit to marginal cost Economics as Social Science and Policy ToolPositive statement statements about what isNormative statement statements about what ought to beEconomic model simplified description of the economic world that includes only features needed for purpose of explanationChapter 2 The Economic Problem Production Possibilities and Opportunity CostPPF is the boundary between unattainable and attainable production possibilitiesPoints inside PPF are inefficientunusedmisallocated resourcesPoints on PPF are preferred to points inside PPFPoints outside PPF are unattainablePPF is bowed outward since resources arent equally productiveincreasing opportunity costs Using Resources EfficientlyMarginal Cost opportunity cost of producing one more unitMC curve slopes upwards due to increasing OCMarginal Benefit benefit from consuming one more unit of a goodMB curve slopes downward due to decreasing MBAllocative efficiency outputs are produced at lowest possible cost and in quantities providing greatest possible benefit MBMCProduction efficiency cannot produce more of one good without producing less of another Economic GrowthEconomic growth expansion of production possibilitiesoutward shift of PPF resulting from change in resources or technologyOC of increased goodsservices is decreased consumption todayChapter 3 Demand and Supply Markets and PricesMarket group of buyers and sellers of a particular goodserviceCompetitive market many sellers and buyersno single buyerseller can influence priceMoney price amount of money needed to purchase a goodserviceRelative price ratio of money price to money price of OC DemandQuantity demanded amount that consumers are willing and able to purchase at a particular time at a particular priceLaw of demand higher the price smaller Q substitutionincome effect dSubstitution effect when OC increases people seek substitutes so Q decreases d Income effect when price increases people cannot afford the same things as before so Q ddecreasesFactors o Prices of related goods o Expected future prices o Income o Expected future incomecredit o Population o Preferences SupplyQuantity supplied amount that producers plan to sell during a given period at a particular priceLaw of supply higher price higher Q s Factors o The prices of factors of production oThe prices of related goods producedoExpected future pricesoThe number of suppliers oTechnology oState of natureChapter 20 Measuring GDP and Economic Growth
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