ECON 1116 Study Guide - Midterm Guide: Demand Curve, Opportunity Cost, Substitute Good
4 Oct 2016
School
Department
Course
Professor
Micro Economics Exam 1-Ch1, 3, 4, 8 (specific sections covered in class)
Economics-the study of how people manage their resources to meet their needs and enhance
their well-being
Needs-basic requirements for food, shelter, and physical security
Well being-depends on economic indicators (income/wealth), leisure time, perceptions of
fairness
Goal of economy-positive questions: concerned with issues of fact, or what is ex: what is the
level of poverty in the US?
-we can get data/facts regarding this question
-normative questions: concerned with goals and values or “what should be” ex:
how much effort should be given to poverty reduction?
-requires analysis of values and goods
-intermediate goals: something desirable because its achievement will bring you
closer to your final good(s) ex: passing this class job
-final good: requires no further justification; it’s an end in itself ex: graduating clg
Traditional Economic Goals-emphasis is wealth. Net value of all material and financial assets
owned by an individual
-wealthier country is safer, stronger, happier
-final goal is security, intermediate goal is wealth bc it can be used to pursue many final
goals
Efficiency-economic efficiency: inputs are used in such a way that they yield highest possible
values of input OR it’s absence of waste
Drawbacks: in general, the people with most money will disproportionately determine what is
an efficient allocation of resources
Ex: production of luxury cars over basic health care
-Thinking of efficiency only in terms of money value ca lead to neglect and high
social/enviro costs
Unintended Consequences-negative or positive externality
find more resources at oneclass.com
find more resources at oneclass.com
-Negative externality-Negative consequences of an eco. activity that affect those who aren’t
directly involved in activity
-Positive externality-beneficial effects of an eco. Activity that accrue to those who are not
directly involved in activity
ex: town builds shopping center which increases value of homes in town
Detor
Y=mx+b dependent variable=(slope)(independent)+y-intercept
Y=2x+1 (positive relationship)
Interpret slope-for every 1 change in x, y changes max y=2x+1…changes by a factor of 2
Issues that define economics-An activity is economic if it involves one or more of the 4 tasks
that allow us to meet our needs and enhance our well being
4 tasks- 1. Resource maintenance 2. Production 3. Distribution 4. Consumption
Resource maintenance-managing natural, produced human resources so that their productivity
is sustained ex: how oil is to be extracted from oil field and how much to leave for future
Production-Activities which result in goods/services
-goods are tangible (book), services are intangible (tech.)
Distribution-sharing of products and resources among people
Exchange- trading one thing for another
International trade-when one country produces coffee and trades with another for oil
Consumption-final use of goods/services
Economic Trade Off
Abundance-resources are abundant to the extent that they exist in plentiful supply for meeting
various goods
Scarcity-Resources are scarce to the extent that they are not sufficient to allow all goods to be
accomplished at once
Opportunity cost-value of the best alternative that is forgone when a choice is made
Highest value alternative-if not in class, I would sleep
Production Possibility Frontier (PPF)-shows max. amounts of 2 outputs that society could
produce from a given resource over a given time period
find more resources at oneclass.com
find more resources at oneclass.com
2 goods, increasing one decreases the other negative relationship
Linear PPF-G=-3b+1 … if b is increased by one, g is decreased by 3
The opportunity cost of (1B is 3G) producing 1 unit of B is 3 units of G
The opportunity cost of linear PPF’s are constant
Bows Outward PPF-opportunity cost for PPF that bows outward is NOT CONSTANT
Points on corner (top left corner of graph)- all resources to bread, none to books
Point D-inefficient allocation-more of both can be produced
Below frontier line=inefficient (point d)
On line=efficient (a, b)
Above line=impossible, allocation is unobtainable scarcity (C)
Shifts of PPF
1. Technological advancement shifts PPF outward
2. Population increase productivity increase
3. Higher level of resource maintenance will shift PPF outward
Microeconomics-subfield of general economics that focuses on activities that take place within
and among the major economic organizations of a society
Micro. In context-discusses how economic activities take place within the physical and social
context
eco activities bring natural resources into the social world and transform them for human use.
In the process, pollution and waste materials are generated and these in turn affect flow of
natural inputs that are available
physical context for eco. activities includes natural world and built environment
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Micro economics exam 1-ch1, 3, 4, 8 (specific sections covered in class) Economics-the study of how people manage their resources to meet their needs and enhance their well-being. Needs-basic requirements for food, shelter, and physical security. Well being-depends on economic indicators (income/wealth), leisure time, perceptions of fairness. Intermediate goals: something desirable because its achievement will bring you closer to your final good(s) ex: passing this class job. Final good: requires no further justification; it"s an end in itself ex: graduating clg. Net value of all material and financial assets owned by an individual. Final goal is security, intermediate goal is wealth bc it can be used to pursue many final goals. Efficiency-economic efficiency: inputs are used in such a way that they yield highest possible values of input or it"s absence of waste. Drawbacks: in general, the people with most money will disproportionately determine what is an efficient allocation of resources. Ex: production of luxury cars over basic health care.
