ECON 2100 Study Guide - Quiz Guide: Tax Incidence, Price Controls, Economic Equilibrium

106 views4 pages
Published on 17 Sep 2016
Exam 1 Review
1. Scarcity- the limited nature of society’s resources relative to unlimited human’s want.
2. Opportunity Cost- what you give up to obtain it. Benefit that you can get from best alternative.
3. Invisible hand- how individuals pursuit of self-interest in a free market system brings about the
societal material well-being through voluntary exchange.
4. Normative vs. Positive Statements: N- Policy advisors which attempt to prescribe the world as it
should be. P- Scientists which attempt to describe the world as it is.
5. Ceteris Paribus- (all else equal) A device used to analyze the relationship between two variables
while the values of other variables are held unchanged.
6. People think at the margin:
7. A. Comparative Advantage vs. absolute advantage: CA-Differences in the costs of production
determine “who should produce what?” AA: The comparison among producers of a good
according to their productivity
B: CA and opportunity cost and trade: The producer who has the smaller opportunity cost of
producing a good is said to have a comparative advantage in producing that good. Compares
producers of a good according to their opportunity cost.
C: What is range of a fair price for trade? For both parties to gain from trade, the price at which
they trade must lie between the two opportunity costs.
8. PPF:
A. Which points are productively efficient? Points that lie on the PPF or inside it.
B. PPF and economic growth (shift of PPF curve): Additional resources or improvements in
technology can lead to the economy producing more of certain goods and more efficiently.
C. Straight line PPF is related to constant opportunity cost; while bowed shape PPF is related
changing opportunity cost along the line.
9. Adam Smith and David Ricardo: Adam Smith- In his 1776 book An Inquiry into the Nature and
Causes of the Wealth of Nations, Adam Smith performed a detailed analysis of trade and
economic interdependence (specialization). David Ricardo: In his 1816 book Principles of
Political Economy and Taxation, David Ricardo developed the principle of comparative
advantage as we know it today.
10. Demand:
find more resources at
find more resources at
Unlock document

This preview shows page 1 of the document.
Unlock all 4 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Grade+

Unlimited access to all notes and study guides.

Grade+All Inclusive
$10 USD/m
This Study Guide
$25 USD
You will be charged $120 USD 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.