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Econ 101 Study Guide

by: Julia Vaughan

Econ 101 Study Guide ECON 101

Julia Vaughan
GPA 3.0

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About this Document

This is for the first study guide of the class. Take note the test also includes examples from Classroom Exercises that are not included in this text.
Introduction to Microeconomic Analysis
Lisa Takeyama
Study Guide
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This 3 page Study Guide was uploaded by Julia Vaughan on Monday October 3, 2016. The Study Guide belongs to ECON 101 at San Francisco State University taught by Lisa Takeyama in Fall 2016. Since its upload, it has received 78 views.

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Date Created: 10/03/16
STUDY GUIDE FOR ECON 101 GENERAL ECONOMIC CONCEPTS AND PRINCIPLES What is Microeconomics? It looks at the building blocks of the economy. They look at the individual agent: Household, firm, person demand decisions by households for services. Studies the factors that go behind why people use services. Fundamental economic problem: Allocating scarce resources in light of unlimited wants, scarcity, tradeoffs, and opportunity cost (the highest value alternative foregone) Opportunity Cost: b/c resources are scarce, people need to make trade offs. When we choose alternative “A” it means we can’t Choose alternative “B.” So opportunity cost “A” is the value of what you gave up for it. Example: When you choose to go to school, your opportunity cost is going to work and making money. Marginal Analysis: (How much/ Many?) What is the ideal how much? Marginal Benefit(MB)= incremental benefit of an additional unit of some activity Producer: How much can I have Consumer: What is my benefit Marginal Cost(MC)= incremental cost of an additional unit of some activity ****You always want MB hIgher than MC to be worth it! MB _>_ MC : Proceed w/ the additional marginal unit MB < MC: Do Not Proceed Importance of incentives: People respond to incentives Decisions in self- interest vs Social interest Interest Economic questions 1. What do we produce? Types of goods/ services a. Consumption good/ services b. Capital goods ( or investment good) i. Goods which expand economy’s productive capacity C. Export goods D. Government goods/ services 2. How do we produce them? a. Factors of production i.Land (natural resources) ii.Labor iii.Capital iv.Entrepreneurship 3.For whom do we produce? a. Who can afford it based on income. i.Depends on income: 1. Wages = Labor 2. Rent = Providers of capital 3. Interest = Providers of Capital 4. Profit = Payment to entrepreneurs Ceteris Paribus Assumption: “Everything else equal” Positive analysis/ Statement : A Statement that can be tested. What is, what will be, what was Normative analysis/ Statement: Can not be tested. Contain a value judgment. What should be? PRODUCTION ALTERNATIVES TABLE AND PRODUCTION POSSIBILITIES FRONTIER (PPF) Points OUTSIDE the line of the PPF are Unattainable Points UNDER the line of the PPF are attainable, but inefficient Points ON the line of the PPF are attainable and efficient Law of increasing opportunity cost: As more of a good is produced, the opportunity cost begins to increase. Why? Not all resources are equally productive in all uses. Slope of Curve: ^^^^^^^^^^^^^^ This is Opportunity Cost^^^^^^^^^^^^^^^^ Slope of PPF reflects opportunity cost of obtaining more of the “x”- axis good. Given the law of high opportunity cost = PPF is bowed outward. ALLOCATION MECHANISMS AND MARKETS Allocation Mechanism: Command and control(authority) Price system What the worth of an item is and is it equal, more than, or less than the item of trade.


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