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ECON 200 Study Guide - Fall 2018, Comprehensive Midterm Notes - Economic Equilibrium, Demand Curve, Point Of Sale


Department
Economics
Course Code
ECON 200
Professor
Hossien Abbasi
Study Guide
Midterm

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ECON 200
MIDTERM EXAM
STUDY GUIDE
Fall 2018

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

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Chapter 1:
Cost and benefit is a big part about choice
Economics is the study of how people manage resources
Economics is the study of choices people make
Not all about money
Economists assume that people:
R aware of costs and benefits of all available options
Compares all available choices
Purposefully behave in the way that will best have goal
This is rational behavior
This assumption is not perfect but helps to explain a lot about real world
Economics is divided into 2 broad fields
microeconomics : study of choice individuals and firms make and the
implications of these choices
Macroeconomics: study of the economy on a regional, national or
international scale
Scarcity
People make decisions aimed at getting the things they want
People want a lot of everything but, they are constrained by limited
resources
Scarcity is the condition of people's’ wants always being greater than
available resources
Scarcity is a fact of time
Individuals’ resources: time and money
Societies resources: factors of production, such as labor and tech
Opportunity cost
Every decision in life involves weighing the tradeoff b/w costs and benefits
The direct cost includes both the direct cost and opportunity cost
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The direct cost includes all associated costs
The opportunity cost is the value of what one gives up to get something
It includes the value of the next best alternative, not the value of the
possible alternatives
Your next best alternative may consist of more than 1 part
Opportunity is about give up or are missing out on
Marginal decisions
In economics we assume people make choices at every step
People compare the additional(=marginal) benefits of a choice against the
additional(marginal) costs(not total cost and benefit)
Referring to as marginal decision making
No consideration of past benefits or costs, both referred to as sunk
Sunk Costs: costs that already have been incurred and cannot be
recovered
(check slide for ex)
Incentives
Rational behavior suggests that people respond the incentives
An incentive is something that causes a change in the tradeoffs that people
face
Pos incentives: makes people more likely to do something by
lowering the opportunity cost
Neg incentive: makes people less likely to do something by raising
their opportunity
It will change the cost and benefit for people. Aka type of movie
Efficiency
Under normal circumstances, individuals and firms seek opportunities to
get what they want(mas dinero)
If a profit-making opportunity exists, someone will provide the
good or service
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