Study Guide for Exam 1
Study Guide for Exam 1 Econ 2610-05
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This 3 page Study Guide was uploaded by Hjduarte on Friday September 16, 2016. The Study Guide belongs to Econ 2610-05 at Youngstown State University taught by Ms. Jenyk in Fall 2016. Since its upload, it has received 12 views.
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Date Created: 09/16/16
MicroEconomics Exam 1 What is Economics? Study of how people will make decisions based on the condition and scarcity of resources (income, money, time etc...) Looks for cause and effect relationships. Micro vs Macro? Microeconomics is the study of individual choices Macroeconomics is the economy as a whole being studied How do people make choices?- Benefits vs Costs Cost-Benefit analysis- comparing the possible benefits to your opportunity costs- the loss of potential gain from other alternatives had they been chosen. Chapter 1 overview Information is important- allows people to make better decisions (when information is more on one end of a transaction this is what we call)asymmetric Information People respond to incentives- gives them a reason to want what they do Private free markets are efficient – allows room for new growth Govt. Deals with market failure- Government involvement is limited until failure Individual Perspective- A unhealthy eater isn't going to see need for new healthy eating Specialization- Good for keeping costs low Choice and scarcity force trade offs- If something isn't available you go to 'plan b' for it Thinking at the margin- considering the additional costs/benefits (Buffet vs traditional) Productivity determines the standard of living- how much you put in is what you get Correlation- identifies if a relationship between two variables exists Positive- move in the same direction Negative- move opposite Step one in identifying cause and effect----> DOES NOT mean Causation V Omitted variables Spurious Relationships 3 Basic Economic Questions 1) What goods will be produced? 2) How will they be produced? 3)Who gets the goods? Factors of Production Land (physical property, fields for raw materials, all natural resources used) Labor(workers for each part of production) Capital(all the machines and equipment needed) Entrepreneur (who is taking the risk here?) PPC All points on the curve are possible combinations of using goods to the fullest to produce goods. Any point BELOW the curve is inefficient Any point ABOVE is unattainable due to the limited resource (RESOURCES ARE FIXED VARIABLES) ASSUMPTIONS FOR THE PPC 1) Economy only produces 2 goods 2)Resources are fixed 3) Level of technology is fixed 4) Fixed point in time Supply and demand shifters Consumer tastes and preferences Income Price of related goods Number of Buyers Expectations ABSOLUTE ADVANTAGE CALCULATIONS Given up goods Gained goods
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