ECON 201 Study Guide - Fall 2018, Comprehensive Midterm Notes - Graph Of A Function, Demand Curve, Compact Cassette
ECON 201
MIDTERM EXAM
STUDY GUIDE
Fall 2018
ECON 201 – Lecture 1 – Chapters 1-3
*All charts and graphs based off or replicated by Joel Han in class
“Economics is the study of how individual agents interact to allocate scarce resources, in
order to fulfill their needs and wants”
Tradeoffs – More of one thing, give up another
Opportunity Cost – Getting/doing is the resources given up, relative to doing next best
thing
Top 3 things could be doing right now:
oIn class
oSleeping
oGetting coffee
Example of opportunity cost, have to choose one and give up the others,
choosing to do the “next best thing”
Figuring opportunity Cost:
oIf Larry goes to college, he will spend a total of $90,000 on tuition, $20,000 on
rent, and earn $10,000 by working on campus.
oIf he does not go to college, he will earn $40,000 by working full-time, and pay
$20,000 to rent the same apartment.
oLarry's opportunity cost of going to college is? How does that compare to the
accounting (monetary) cost?
Going to College: Difference between 90,000 and 0 = 90,000
Lost Wages: Difference between 10,000 and 40,000 = 30,000
Rent: Difference between 20,000 and 20,000 = 0
90,000+30,000+120,000. 120,000 is the opportunity cost
Production Possibility Frontier (PPF)
oKeeps things simple, look at a two-good economy
oPPF shows two good economy in graph form
oPPF shows all feasible combinations
Example of PPF chart
Accounting Cost – The money that is spent on getting something or producing
something
Agents
oNeed to make assumptions
oAssume they are rational - compare marginal benefit and marginal cost
Diminishing Marginal Utility
oExample: If buying pizza slices, marginal benefit of the next slice tends to go
down with more slices (pizza)
Document Summary
Econ 201 lecture 1 chapters 1-3. Economics is the study of how individual agents interact to allocate scarce resources, in order to fulfill their needs and wants . Tradeoffs more of one thing, give up another. Opportunity cost getting/doing is the resources given up, relative to doing next best thing. Top 3 things could be doing right now: in class, sleeping, getting coffee. Example of opportunity cost, have to choose one and give up the others, choosing to do the next best thing . Going to college: difference between 90,000 and 0 = 90,000. Lost wages: difference between 10,000 and 40,000 = 30,000. Rent: difference between 20,000 and 20,000 = 0. Production possibility frontier (ppf: keeps things simple, look at a two-good economy, ppf shows two good economy in graph form, ppf shows all feasible combinations. Accounting cost the money that is spent on getting something or producing something. Assume they are rational - compare marginal benefit and marginal cost.
