Chapter 1-4 Study Guide
Chapter 1-4 Study Guide ECON 211 (Principles of Economics)
Popular in Macroeconomics
ECON 211 (Principles of Economics)
verified elite notetaker
Popular in Economcs
This 3 page Study Guide was uploaded by Daniell Albert on Monday February 1, 2016. The Study Guide belongs to ECON 211 (Principles of Economics) at Arizona State University taught by Stefan Ruediger in Winter 2016. Since its upload, it has received 57 views. For similar materials see Macroeconomics in Economcs at Arizona State University.
Reviews for Chapter 1-4 Study Guide
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/01/16
Study Guide Exam #1: What is economics? Study of choice under conditions of scarcity Study of decision-making Define: Scarcity: a situation in which the amount of something available is insufficient to satisfy the desire for it. Resources: things we use to make goods and services o Land/natural resources o Labor o Capital o Entrepreneurship Opportunity Cost: o What is given up when taking an action or making a choice o What we must forego when we make that choice o Use O.C. analysis to decide about tradeoffs. Trade-offs: involves a sacrifice that must be made to obtain a certain product, service or experience. Efficiency: society is getting the maximum benefits from the scare resources. Unemployment: occurs when there the market is inefficient and at a recession. Production Possibility Frontier (PPF): Define: a graph that shows the combination of two goods the economy can possibly produce given the available resources and the available technology. The PPF could be a straight line or bow shaped. Depends on what happens to opportunity cost as economy shifts resources from one industry to the other. o Straight= opportunity cost remains constant o Bow= opportunity cost of a good rises more of the good is produced. PPF is bow shaped when different workers have diff. skills,& opportunity cost of producing one good in terms of the other. Bow shaped when there is some other resources, or mix of resources w/ opportunity cost. Points on the PPF: o Possible o Efficient: all resources are fully utilized Points under the PPF: o Possible o Not efficient: some resources unutilized. Points above the PPF: o Not possible. Law of Increasing Opportunity Cost: is a principle that states that once all factors of production (land, labor, and capital) are at maximum output and efficiency, producing more will cost more than average. As production increases, the opportunity cost does as well. Economic Growth: with additional resources or an improvement in technology, or improvement in education, the economy can produce more, computers, more wheat of any combination in between. Technological Change: changes the line on the PPF either on the X or Y axis based on how it is labeled. Production increases. Specialization/Exchange: Enable us to enjoy greater production and higher living standards. All economics exhibit degree of specialization/exchange. Specialization: method of production in which each person concentrates on a limited number of activities. Exchange: the act of trading with others to obtain what we desire. Absolute Advantage: the ability to produce a good using fewer inputs than another producer “the better” If each country has a A.A. in one good and specializes in that good, then both countries can gain from trade. Measures the cost of a good in terms of the inputs required to produce it. Comparative Advantage: the ability to produce a good at a lower opportunity cost than another producer. Gains from trade a rise from C.A. (differences in opp. Cost) Consider the question: Who can produce the product at a lower cost? Law of Demand: prefer to buy things at a lower price, if price goes down, you buy more More/lower price = Greater quantity demanded Aplia definition: the claim that, with other things being equal, the quantity demanded of a good falls when the price of that good rises. Quantity demanded: any good is that amount of the good that buyers are willing/able to purchase- the price determines. Aplia definition: the amount of a good that buyers are willing and able to purchase at a given price. Demand Curve: A graphical object showing the relationship between the price of a good and the amount of the good that buyers are willing and able to purchase at various prices. Demand Schedule: A table; quantities of a good that consumers would choose to purchase at diff. prices. Aplia definition: a table showing the relationship between the price of a good and the amount that buyers are willing and able to purchase at various prices. Factors that shift curve: 1. Income 2. Wealth 3. Price of related goods: substitute 4. Population 5. Expected price 6. Taste 7. Other variables *Look at Chapter 4 notes for detailed definitions. Law of supply: as the price of a good increases, the quantity supplied increases, ceteris paribus. Quantity Supplied: amount of goods that sellers would choose to sell at a particular price given the constraints they face. Factors of Shift curve: 1. Input prices 2. Price of alternatives 3. Technology 4. # of Firms (sellers) 5. Expectations (future) 6. Changes in weather/Natural events. *Look in Chapter 4 notes for more detail. Market Equilibrium: the point where the quantity demand and quantity supply intersect to create the equal market price. Joint shifts of supply and demand: one factor from the supply can change the effect on the demand curve, or vice-versa.
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'