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Midterm #1 Review the only important things from each chapter. I compressed the first 6 lectures into this. diagrams included, has some shorthand. includes helpful acronyms

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Wilfrid Laurier University
Olivia Ozlem Mesta

Chapter 1 Making Choices People Face Trade-offs >equity/efficiency Cost of something is what you give up to get it >opportunity cost Rational people think at the Margin >small changes=big diff People respond to incentives >incentive=reward/punishment Interact Trade can make everyone better off >specializing + trade = more of each good for everyone Markets are usually a good way to organize economic activity >everyone acting for themselves in a market causes "invisible hand" to guide best decision Goverments can sometimes improve markets >promote efficiency/equity Economy as a Whole A country's standard of living depends on its ability to produce goods & services >productivity=amount of goods/services produced in each hour of work C T I M T I M S Chapter 2 Scientific method--> explain the world Production Possibilities Frontier->graph, combination of two goods (shows opportunity cost) SLOPE=> OPPORTUNITY COST (the one you divide by is the one your finding the OC of) positive statement=>how things ARE normative statement=>how things SHOULD BE Chapter 3 Without trade, Production Possibilities Frontier = Consumption Possibilities Frontier. With trade, Consumption Possibilities Frontier > Production Possibilities Frontier (can be greater, i.e. outside of the frontier) Comparative advantage= lower Opportunity cost Absolute advantage= lower inputs for higher production Chapter 4 Competitive market --> one where so many people = one person's changes make no diff (one convenience store changes price, all the others wont) perfectly competitive market--> all the goods are exactly the same (gasoline, one changes price the others def wont) Demand: relationship between price and the amount buyers are willing to buy Supply: amount of any good or service that a seller is willing to sell Individual Demand: the quantity of a product or service that is demanded by a single buyer Market Demand: the quantity of a product or service that is demanded by all the buyers in the market (individual demand’s added) Price simply makes the demand move up or down the demand curve (quantity dema
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