Study Guides (238,612)
United States (119,856)
Economics (275)
CAS EC 101 (97)


5 Pages
Unlock Document

Boston University
CAS EC 101
Neil Watson

BEST ECONOMICS EXAM ONE STUDY GUIDE EVER Sept 7 ● Central Qs of Econ: what gets produced, how does it get produced, who gets what is produced ● A market system is run by self-interest, has to be checked by competition, and has to be within the law Sept 9 Micro economics – economic decisions of individuals (individual consumers/households, firms, markets) Macro economics – economy as a whole: all consumers, firms, markets Households supply ▯ factor markets (labor/capital) ▯ firms demand ^ households Firms ^households demand ▯ product markets (goods/services) ▯ firm supply Determinants of Demand -price normal goods- buy more as income inc. -tastes and preferences inferior goods- buy less as income inc. -income/budget substitutes-bought instead of each other -expectations one demand goes up, other goes down -price of related goods complements- consumed together, demand up for one, up for the other Demand schedule - a table that shows the relationship between the price of a good and the quantity demanded (all non-price determinants held constant) -quantity demanded for the market is the sum of individual’s quantities demanded -individual demand – q market demand – Q Sept 12 -change in quantity demanded is a movement along the demand curve -change in demand refers to a shift in the demand curve Determinants of Supply -price -input prices (raw materials, labor, machinery, etc) -technology -expectations Supply schedule – a table that shows the relationship between the price of a good and the quantity supplied (non-price determinants held constant) -quantity supplied for the market is the sum of individual’s quantities supplied Sept 14 Equilibrium – the point at which quantity supplied equals quantity demanded -when Qs > Qd the price is too high and there is a surplus. It will naturally go back to equilibrium as price falls -when Qd>Qs the price is too low and there is a shortage, will go back to equilibrium as price falls Price floor – must be set above equilibrium to be binding, is a legally mandated minimum price ex.) minimum wage Price ceiling – binding if below the equilibrium point ex.) rent control Sept 16 Comparative Statics: start at equilibrium, change a nonprice determinant, compare old equilibrium with old 1.) which curve shifts 2.)which direction 3.)what is the effect on the equilibrium P and Q -when demand curve shifts, equil P and Q go in the same direction -when supply curve shifts, equil P and Q go in opposite directions -can tell whether supply shift or demand shift is making the bigger impact by how price responds Sept 19 Price elasticity of demand – eD – percentage change in q demanded divided by the percentage change in price. Measures sensitivity of q demanded to price changes %changeQd eD= %changeP -elasticity can be compared by putting them in percentages More Inelastic demand curve More Elastic demand curve -steeper the demand curve, the more inelastic the demand is. Slope does not equal elasticity ● Perfectly inelastic demand curve, only one Qd, a perfectly vertical demand curve – has an elasticity of infinity ● Perfectly elastic demand curve, a perfectly horizontal demand curve __Qnew – Q old__ (Qnew + Qold)/2 ___________________ eD>1 elastic Pnew – Pold__ eD=1 unit elastic (Pnew + Pold)/2 eD<1 inelastic ● A 1% increase in price causes a #% change in quantity demanded ● In
More Less

Related notes for CAS EC 101

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.