ECON 202 EXAM 1 STUDY GUIDE
I. Module 1: The Big Questions
1.1 Motivation of Economics
1. In what ways are Americans rich compared to other societies today? Housing, entertainment, food, and medical care
2. Why don’t people feel that they are rich?
-People always want more
3. When assessing economic wealth, what should others do? - Compare personal situations to most people alive today 4. What does scarcity emerge from?
- Limited Resources and infinite wants
5. What is economics?
- Scarcity and how societies deal with it.
1.2 What to produce, how to produce it, and who gets it
1. What are the three fundamental questions answered by all economies? - What to produce, how to produce it, and who gets the goods? 2. What’s not a economic question?
- Deciding to eat healthy foods
3. What is another non economic question
- Would people be better off if they wanted less goods
4. is there enough blue bell
5. economics studies:
- Scarcity, social institutions used to address scarcity, what to produce, how to produce it and who gets it.
1.3 – Historical Methods of allocation
1. What are ways that have been used to govern economic activities? - Customs, Apprenticeships, Markets, and Central control.
2. How long has Trade been around?
- Has been a feature of all economies
3. Central Control of economies
- Controlled resources such as water and land
4. What are examples of economic control
- Family or clan leaders, warlords, dictators, and Tribal chieftains 5. How did Hunter-gatherer societies allocate resources?
- Individual decisions, sharing customs, organized hunting/gathering
1.4 – Barter, Trade, and Markets
1. What did Adam’s book, The wealth of nations, research?
- The factors affecting economic wealth across countries, the role of custom in the economy. Don't forget about the age old question of What drives transport across the mitochondrial membranes into the matrix?
2. What’s the advantage of a market over one on one trade (or barter) - Markets allow for greater specialization, allow trading to occur to a larger extent, and are more efficient.
3. 250 years ago, what question about economics was major? - What would happen if you organized more of the economy with markets 4. What steps are needed to evaluate an economy?
- Determining what will be produced, how, and who gets it. Then evaluate the outcomes
5. What is not about economics?
- Why we need more of anything.
1.5 – An overview of the invisible Hand Theorem
1. What did Adam Smith’s theorem consist of?
- Market outputs are efficient, those outputs are produced efficiently, and those outputs are allocated among buyers in the most effect way. 2. What questions does scarcity create?
- what to produce, how, and who gets it
3. when buyers and sellers operate in a competitive market they - are following their own self-interest, doing whatever serves them best 4. when buyers buy goods in a market:
- they do it because they prefer the good to the other good. 5. If you have a competitive equilibrium for a two-market economy consisting of pizza and burgers:
- The market equilibrium quantity of both pizzas and burgers are efferent. We also discuss several other topics like What is Space?
MODULE 2: TOOLS OF ECONOMICS
2.1 – Economics as a tight logic
1. What can be derived from other assumptions of economics. - Tradeoffs and Opportunity costs
2. What can be derived from assumptions about numbers Don't forget about the age old question of What is Monetary transmission
- Subtraction, multiplication, and division
3. Using basic assumptions you can determine
- Why and when markets are efficient and when government intervention helps or hurts economic performance.If you want to learn more check out What is Sao Tome?
Don't forget about the age old question of What is family system stress?
4. What is an assumption of economics
5. What is needed for simple arithmetic
- Numbers exist, multiplication, and addition
2.2 – Key economics concepts: incentives and marginal Analysis
1. Making “How much”
- Determining the additional benefits and the additional costs of that activity
2. Marginal means:
- Additional or extra If you want to learn more check out What is Globulins?
3. What is a marginal benefit
-the revenue received from the sale of an additional unit
4. Marginal cost
- The extra cost associated with doing an activity
5. the additional cost to a producer hiring an additional unit of labor is called the marginal cost
2.3 – Opportunity costs and gains from trade
1. The best alternative use of a good is called
- Opportunity cots
2. when there is a voluntary exchange
- both parties gain from the exchange
3. The opportunity cost of going to a concert is:
- Equal to the highest value of an alternative use of the time and money spent on the concert
4. The extra cost of doing something is called
- Marginal cost
5. the principle behind opportunity costs
- The economic cost of using a factor of production is the alternative use of that factor is given up `
2.4 – what economics isn’t.
1. it is assumed that rational behavior is useful in explaining choices people make because
-even though people may not behave rationally all the time 2. holding all other personal characteristics- such as age, gender, and income constant, economics would expect that
- People with health insurance are more likely to be overweight than people without health insurance
3. Marginal Utility
- Extra satisfaction received from consuming one more unit of a product 4. economists assume that rational people do all of the following except - undertake activities that benefit others and hurt themselves