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Final

ECON 1010 Study Guide - Final Guide: Consumption Function, Direct Tax, Laffer Curve


Department
Economics
Course Code
ECON 1010
Professor
Steven Edwards
Study Guide
Final

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Notes by: ANU J
Professor: Steve Edwards Course: Introduction to Macroeconomics (ECON 1010)
Macroeconomics ECON 1010 (Edwards)
Review of chapters for the exam
Chapter 1
- Define economics
o Economics is the social science that studies the choices that individuals,
business, governments and entire societies make as they cope with
scarcity and the incentives that influence and reconcile those choices
- Distinguish between microeconomics and macroeconomics
- Explain the two big questions of economics
o How do choices end up determining what, how and for whom
goods/services are produced?
What
How
Factor services in creating goods/services:
o Labour
o Land
o Capital
o Entrepreneurship
Includes risk (defining characteristic)
For whom
o When do choices made in the pursuit of self-interest also promote social
interest?
Globalization
- Explain the key ideas that define the economic way of thinking
o Trade-offs
o Rational choice
o Opportunity costs
o Marginality (incremental changes); benefits and costs
o Positive and normative statements
- Explain how economists go about their work as social scientists and policy
advisers

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Notes by: ANU J
Professor: Steve Edwards Course: Introduction to Macroeconomics (ECON 1010)
Chapter 2
- Define the PPF and use it to calculate opportunity cost
o Zones on the curve:
Inside the curve = inefficient allocation of current resources
Outside the curve = unattainable with current resources
On the curve = maximum efficiency with current resources
o Things to do on a PPF:
Find marginal cost
Find marginal benefit
Find opportunity cost
What is the trade-off?
Evaluate allocative efficiency
Equilibrium between MC and MB
o Economic growth
Reflected through expansion of PPF
Two key factors influence it:
Technological change = development of new goods and
better way of producing goods/services; specialization
(example: smoothies and salad)
Capital accumulation = growth of capital resources, including
human capital
Economic coordination
To reap the gains of trade, four complimentary social
institutions have evolved:
o Firms
Usually after corporate profits
Also other types of firms i.e. NGOs, charities,
etc.
We refer to the firm as a profit-seeking
corporation for the sake of macroeconomics
o Markets
Free market system in Canada
Capitalist-dominated
Profit motive of capitalists and their consumers
drive the market

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Notes by: ANU J
Professor: Steve Edwards Course: Introduction to Macroeconomics (ECON 1010)
o Property rights
This is mine, that is yours
o Money
Medium of exchange that allows for this
market exchange of goods/services to happen
Circular closed flow model of economics
o Two key players:
Firms (producer)
Factor market
Households (consumer)
Goods market
o Understand:
Flow of model
No injections, no withdrawals
How to draw it
- Distinguish between production possibilities and preferences
- Define efficiency
o Two kinds: productive and allocative
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