ECON 101 Study Guide - Quiz Guide: Demand Curve, Time Horizon, Laundry Detergent

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27 Sep 2016
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Course
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Chapters
Chapter 01 – What Economics is about
Chapter 02 – Production Possibility Frontier Framework
Chapter 03 – Supply and Demand Theory
Chapter 04 – Prices: Free Controlled and Relative
Chapter 05 – Supply Demand and Price: Application
Chapter 20 – Elasticity
Lectures
Lecture 1 – What is Economics
Lecture 2 – Basis for Trade and Economic Systems
Lecture 3 – Trade and Supply and Demand
Lecture 4 – Supply and Demand, Consumer Surplus, Producer Surplus, Price Controls
Lecture 5 – Elasticity and the Tax Incidence
Terminology
Microeconomics
oThe branch of economics that deals with human behavior and choices as they
relate to relatively small units (an individual, a firm, an industry, a single
market). Microeconomics is NOT the economics of small countries!!
Macroeconomics
oThe branch of economics that examines the entire economy. In
macroeconomics we can aggregate data to various levels such as: County
Level, State Level, National Level, Global Level
Scarcity
oScarcity is a relative concept
oScarcity drives choice
Think about scarcity
A situation in which resources are insufficient to satisfy all of
our needs and desires
A resource put to use one way, can not at the same time be put
to another use
Scarcity is not the same as depravity
Opportunity Cost
Resources
oAvailable to a society fall into one of these
Land (natural resources)-anything that comes from land
Labor
Capital (human capital, physical capital)
Entrepreneurship- ability and willingness to take risk
Consumer Surplus
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oThe difference between a consumer’s reservation price (the maximum price
a consumer would be willing to pay) and the price the consumers pays in the
market
Producer Surplus
oThe difference between a producer’s reservation price (the minimum price a
producer would be willing to accept) and the price the producers actually
receive in the market
Direct Relationship
Inverse Relationship
Independent Relationship (Zero Relationship)
Price Ceiling
oBinding price ceiling: ceiling price is set BELOW the equilibrium price (policy
makers want to give consumers lower prices)
Creates shortages
Lead to underground markets
Motivate people to become creative
Often times lead to bigger price increases in the future
Price Floor
oBinding price floor: floor price is set ABOVE the equilibrium price (policy
makers want to give producers a higher price)
Create surpluses (Waste)
Sometimes lead to underground markets
Produces feelings of entitlement
Creates a bureaucracy to support it
Creates other unintended consequences (environment)
Positive Economics
oThe specific aspect of economics that determines “what is”
Normative Economics
oThe portion of economics that attempts to address “what should be”
Law of Demand
Law of Supply
Equilibrium
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