[ECON103] - Midterm Exam Guide - Everything you need to know! (14 pages long)
5 Oct 2016
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Know the difference between macro and micro. Command (cuba, north korea) vs market economy (united) states. In the us, the gov plays a substantial role. Competition= freedom of choice in persuit of money. If an idustry is experiencing losses, the will contract their output. Risk is managed better in market systems. When economic profits are zero, the industry is neither contracting nor expanding. Insurance transfers risk from low tolerance people to high tolerance people. Creative destruction (creation of new invention destroys old ways) Demand for a normal good will increase or decrease along with income. Marginal cost (cost of one additional unit) If supply increases and demand decrease - equilibrium price will decrease. Income effect (basically the power of your money) Economic investment is limited by amount of savings. Positive demand shock- demand is higher than expected. Negative demand shock- demand is lower than expected. Airline tickets are an example of something thats flexible/not sticky (even in short run)
