Midterm Review Review for midterm up til midterm

35 views6 pages
Published on 16 Oct 2011
Department
Course
Professor
ECON1900 Midterm Review Chapter 1-6
Chapter 1
Economics is make the best possible choice to get what they want
Scarcity is the inability to satisfy all of our wants
Incentives is reward and penalties for choices
Absolute advantage is ability to produce a product/service at a lower absolute cost than
another producer
Comparative advantage is ability to produce a product/service at a lower opportunity cost than
another producer
Opportunity cost is the cost of choose one over another, the true cost of any choice made,


Microeconomics analyzes the choices made by individuals in households, businesses, and
governments
Macroeconomics analyzes the performance of the whole Canadian and global economy
3 Key to smart choices
1. Choose only when additional benefits are greater than additional opportunity cost
a. $1million contract is additional benefit, trip to Hawaii is additional opportunity
cost
2. Count only additional benefits and additional opportunity costs
3. Be sure to count all additional benefits and costs, including implicit cost and
externalities
Marginal means additional
Implicit costs is opportunity costs of investing your own money or time
Negative externalities is cost that affect others who are external to a choice or trade
Damage to environment when you purchase gasoline to power your car
Positive externalities is benefit that affect others who are external to a choice or trade
Plant a beautiful garden in your lawn, your neighbor also benefit from it
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 6 pages and 3 million more documents.

Already have an account? Log in
Chapter 2
Preferences is your wants and their intensities
Demand is consumers willingness and ability to pay for a particular product/service
Marginal benefit is additional benefit from a choice, provide satisfaction
Water is abundant, marginal benefit is low, diamonds are scarce, marginal benefit is
high
Quantity demanded is amount you actually plan to buy at a given price
Market demand is sum of demands of all individuals willing and able to buy a particular
product/service
Law of demand is if the price of a product/service rises, quantity demanded decreases
Decrease in demand when decrease in consumers’ willingness and ability to pay
Increase in demand when increase in consumers willingness and ability to pay
Increase in preference
Rise in price of a substitute (products/services used in place of each other to satisfy the
same want)
Fall in price of a complement (products/services used together to satisfy the same want
Increase in income for normal goods (products/services you buy more of when your
income increases)
Decrease in income for inferior goods (products/services you buy less of when your
income increases
Rise in expected future prices
Increase in number of consumers
Price elasticity of demand 

Inelastic (<1)
o Small response in quantity demanded when price rises
o Demand for insulin by a diabetic
o Price rise are the smart choice
Elastic (>1)
o Large response in quantity demanded when price rises
o Demand for yellow tennis ball
o Price cut are the smart choice
Total revenue is all money a business receives from sales = price per unit (P) quantity sold (Q)
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 6 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Economics is make the best possible choice to get what they want. Scarcity is the inability to satisfy all of our wants. Absolute advantage is ability to produce a product/service at a lower absolute cost than another producer. Comparative advantage is ability to produce a product/service at a lower opportunity cost than another producer. Opportunity cost is the cost of choose one over another, the true cost of any choice made, Microeconomics analyzes the choices made by individuals in households, businesses, and governments. Macroeconomics analyzes the performance of the whole canadian and global economy. Implicit costs is opportunity costs of investing your own money or time. Negative externalities is cost that affect others who are external to a choice or trade. Damage to environment when you purchase gasoline to power your car. Positive externalities is benefit that affect others who are external to a choice or trade. Plant a beautiful garden in your lawn, your neighbor also benefit from it.

Get OneClass Grade+

Unlimited access to all notes and study guides.

YearlyMost Popular
75% OFF
$9.98/m
Monthly
$39.98/m
Single doc
$39.98

or

You will be charged $119.76 upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.