[ECON 101] - Midterm Exam Guide - Ultimate 15 pages long Study Guide!

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5 Oct 2016
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ECON 101
MIDTERM EXAM
STUDY GUIDE
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Econ 101
Micro and Macro
oDecision of individual
oMacro- broader picture
Aggedate data at national level
oMicro- branch of economics deals with human behavior and choices as to
small units (individual, firm) NOT Small countries economics
oMacro- branch of economics that examines entire economy aggregate data to
county, state, national and global
Pos Vs Normative
oPos= scientific aspect of economic “What is”
Ex: what is the relationship between income and corruption?
Marginal prosperity
oNorm: protum that attempts “what should be”
Ex: should anyone have as much money as Bill gates when there are
so many people living in extreme poverty throughout the world?”
oAcademic economist: teaching/researcher
The concept of scarcity
oDo we really live in a world of scarcity?
Yes
oScarcity
Scarcity is a relative concept
Scarcity drives choice
Other ways to think about it:
A situation In which resources are insufficient to satisfy all of
our needs and desires
oResources
The resources available to society fall into one of these categories:
Land- anything comes from land
Labor
Capital (human capital, physical capital)
Entrepreneurship- ability and willingness to take risk
oCapital
Capital- something produced that is long-lasting and used to produce
other goods
Physical- non human assets used in production to produce
other products
Human- productive skills and technological knowledge
embodied in labor
Capital stock- the total amount of capital available to a nation,
in all forms, for productive use at any given time
Capital goods- goods that can be used to make either other
capital goods or consumer goods
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Capital in all forms is important to a society because it makes
greater production possible
oNatural resources
Land (natural resources)- gifts of nature such as physical space and
prime materials (timber, arable land, crude oil, iron ore, coal, etc.)
Renewable resources- resources that can regenerate
themselves so they need never run out
Exhaustible resources- resources that are available in limited
amounts
oEntrepreneurship Vs. Management
Entrepreneurship- the willingness by creative people to take risks to
create new and innovative products
Management- the ability to combine and manage resources (land,
labor, human capital, and physical capital) in a productive venture
Warren Buffet’s top two rules for management
Don’t lose money
Don’t forget rule number 1
oThe entrepreneur is a person who takes a risk to gather together land, labor,
physical capital (plant, and equipment) and human capital to create a
product that can be sold in the market. Really innovative entrepreneurs
develop entire industries) personal computer software- bill gates
oRationing devices
Rationing devices- a means for deciding who gets a portion of
available resources and goods
Ways:
Money (market economy)
Time (command economy)
Non-price criteria- first-come- first-served
Non- price criteria- strength
Non-price criteria- intelligence
Non-price criteria- looks/ appearance
oMarginal analysis- economic efficiency in an activity can be characterized as
the point at which the marginal benefit from doing something is equal to the
marginal cost of doing that
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