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Economics 201 exam 1 study guide

by: Katie Conner

Economics 201 exam 1 study guide Econ 201

Marketplace > Economcs > Econ 201 > Economics 201 exam 1 study guide
Katie Conner

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About this Document

Study guide covering terms from week 1-week 4
Intro Economics: Survey Course
Donna Bueckman
Study Guide
econ 201. economics 201, Intro to Economics
50 ?




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This 3 page Study Guide was uploaded by Katie Conner on Saturday February 6, 2016. The Study Guide belongs to Econ 201 at a university taught by Donna Bueckman in Spring 2016. Since its upload, it has received 113 views.

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Date Created: 02/06/16
Economics 201 Bueckman TERMS & TOPICS – Exam 1 Scarcity­ limitation of resources Economics­the study of how people make decisions when dealing with scarcity Tradeoff­when you give up one thing to have more of another Organize economic activity­managing scarce resources; determines what to produce, how to  produce it, and who will get it Economic systems­includes different types of economies and the models of how they work Traditional economy­follows traditional ways of doing things but may not be the most  efficient way to do it Command economy­ trickle­down dictator type Market economy­run by supply and demand, decentralized decision making, division of  labor (assembly lines) and production capability, marketers organize economic activity  through price, self­interest drives decisions Division of labor­assembly line; everyone has a part they do to contribute to the whole product Adam Smith­ The Wealth of Nations 1776, considered the father of economics and promoted  decentralized decision making Invisible hand­ what leads people to make economic decisions based on their own personal  wants Deductive reasoning­using simplified assumptions Assumptions­something that simplifies the complexity of things Models­simplified representation Circular flow model­visual model of the economy, it shows how dollars flow through markets  among households and firms Households­gets income and spends it on goods and services and uses those goods and  services towards labor, capitol, and land Firms­gets revenue from the households buying their goods and services and it goes  towards wages, rent, and profit and uses production to make goods and services Market for goods/services­goods and services that people buy Market for factors of production­what businesses that provide goods and services spend  money on Microeconomics­focuses on individual decision makers Macroeconomics­focuses on the economy as a whole Roles of an economist: Scientist­tries to explain things Policy advisor­tries to give advice to improve or change policies Positive statements­describes something as it was, is, or could be based on knowledge of past Normative statements­says how something should be Opportunity cost­what must be given up to have something else (not money) Production Possibilities Frontier (model)­visual model of scarcity, trade­offs, and efficiency  given the available resources and technology PPF shape Linear­theoretical shape of PPF if cost is constant Curved – increasing opportunity cost­actual shape of PPF as the economy produces more  or less of the product and the price changes Resource specialization­gives the PPF a bow shape PPF topics Tradeoff Opportunity cost Efficiency Productive­on the PPF and technically efficient but may not be the most efficient Allocative­where society wants to be on the PPF (most efficient) Trade between two countries Consumption v. production positions­countries can specialize in producing one  good and trade it with other countries for their goods Exports­goods produced domestically and sold abroad Imports­goods produced abroad and sold locally Absolute advantage­ability to produce a good using fewer inputs than another producer Comparative advantage­ability to produce a good at a lower opportunity cost than another  producer Reasons why a country may choose not to trade: they may have the absolute/comparative  advantage in a good Market­anything that brings buyers and sellers together Competitive market­market with multiple buyers and sellers Perfectly competitive market­buyers and sellers don’t influence price Marginal analysis­making incremental adjustments to an existing plan Ceteris paribus – other things equal Demand Law of Demand­claim that the quantity demanded of a good falls when its price (P) rises; when price changes demand will change Quantity demanded­ amount of a product wanted at a given price Demand schedule­ list of prices and quantities Demand Curve­ graph of demand schedule Demand Curve Shifters: Number of buyers, Income, Prices of related goods, Tastes,  expectations Normal goods­as income goes up, demand goes up Inferior Goods­as income goes up, demand goes down Substitutes in consumption­when price for one goes up, the demand for its substitute goes up Complements in consumption­when price for one goes up, demand for its compliment does  down (ex: tennis racket prices increase, demand for tennis balls decrease) Shift vs. Movement along Curve Change in demand­a shift on the PPF curve from non­price determinant changes Change in the quantity demanded­a movement on the fixed curve when price changes Supply Law of supply­quantity supplied of a good rises when its price rises Supply Schedule­market supply vs individual supply Supply Curve Shifters: Number of sellers, Input prices, Technology, Expectations,  Government policy, “Natural” Production conditions, Substitutes in production Shift vs. Movement along Curve Change in supply­a shift in the curve Change in the quantity supplied­determined by a change in price


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