ECN 2025- Final Exam Guide - Comprehensive Notes for the exam ( 80 pages long!)

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4 Dec 2017
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NSU
ECN 2025
FINAL EXAM
STUDY GUIDE
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SET 1
Scarcity
A situation in which unlimited wants exceed the limited resources availabe to fulfill those wants
Economics
The study of the choices people make to attain their goals, given their scarce resources
Economic model
A simplified version of reality used to analyze real world economic situations
Market
A group of buyers and sellers of a good or service and the institution or arrangement by which
they come together to trade
3 key economic ideas
1. People are rational
2. People respond to economic incentives
3. Optimal decisions are made at the margin
Marginal analysis
Analysis that involves comparing marginal benefits and marginal costs
Trade-off
The idea that because of scarcity, producing more of more than one good or service means
producing less of another good or service
Opportunity cost
The highest valued alternative that must be given up to engage in an activity
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3 fundamental questions
1. What goods and services will be produced
2. How will the goods and services be produced
3. Who will receive the goods and services produced
Centrally planned economy
An economy in which the government decides how economic resources will be allocated
Market economy
An economy in which the decisions o households and firms interacting in markets allocate
economic resources
Mixed economy
An economy in which most economic decisions result from the interaction of buyers and sellers
in markets but in which the government plays a significant role in the allocation of resources
Productive efficiency
A situation in which a good or service is produced at the lowest possible cost
Allocative efficiency
A state of the economy in which production is in accordance with consumer preferences; in
particular, every good or service is produced up to the point where the last unit provides
marginal benefit to society equal to the marginal cost of producing it
Voluntary exchange
A situation that occurs in markets when both the buyer and seller of a product are made better off
by the transaction
Equity
The fair distribution of economic benefits
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