ECN 203- Midterm Exam Guide - Comprehensive Notes for the exam ( 61 pages long!)
Document Summary
Market-- a mechanism for the exchange of goods or service. Absolute advantage- ability to produce more goods than others with the same amount of resources. Skipper will spend both hours gathering coconuts. Gilligan will spend 1 hours fishing and hour gathering coconuts. W/out trade. General equivalent-- one commodity that is generally accepted for all others. Commodity vs fiat money commodity= gold, silver coins. Medium of exchange-- facilitates the exchange of goods and services. Unit of account-- provide a common way to measure value of holdings. Demand-- quantity of a good buyers are will to purchase at prices. Demand shift : quantity demanded changes at all prices. Supply-- show quantity of good sellers are will to sell at price. Market response-- price adjusts downward until reach equilibrium. If demand decreases: at the old price, there is an excess supply. the price will adjust downward until a new equilibrium is reached.
