Study Guide for Exam 1
Study Guide for Exam 1 ECON 105 001
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ECON 105 001
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This 4 page Study Guide was uploaded by Casey Alderete on Saturday September 12, 2015. The Study Guide belongs to ECON 105 001 at University of New Mexico taught by Dr Cristina Reiser in Summer 2015. Since its upload, it has received 967 views. For similar materials see Introductory Macroeconomics in Economcs at University of New Mexico.
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Date Created: 09/12/15
Trucks thousands per year O Macroeconomics 105 Study Guide Exam 1 Key Terms Economics the study of how society manages its scarce resources Scarcity the limited nature of society s resources Opportunity Cost whatever must be given up to obtain some item Positive Statement claims that attempt to describe the world as it is fact Normative Statement claims that attempt to prescribe how the world should be opinion Absolute Advantage ability to produce mor of a good given the same resources Comparative Advantage ability to produce a good at a lower opportunity cost relative to another producer Gains from Trade people can get more of what they want through trade than through self sufficiency Production Possibility Frontier Model PPF PPF a graph that shows the combination of 2 goods that the economy can possibly produce give the available resources and available technology Assumptions 1 Only two goods produced 2 Resources are fully employed 3 Takes place over specific time period 4 Factors of production qualityquantity are fixed 5 Technology is fixed The y intercept tells us how much of a good we can produce if we allocate all sources to it The x intercept tells us max amount of goods produced Any point on PPF represents attainable and efficient possibility A B C Any point inside the PPF represents an attainable but inefficient possibility D Any point outside PPF represents an unattainable and in inefficient possibility B We can illustrate growth by shifting or pivoting the PPF 8 91011 1234567 Boats thousands per year inward decrease or outwards increase Huiplum Holland Calculating Opportunity Cost I 394 Belgium gt 12 Wheat 6 tulips 12 Wheat 6 tulips man a mm 0 1 Wheat 12 tulip 2 Wheat 1 tulip h H h I l uhpx I39uhps Model of Demand Demand Curve a graph of the relationship between the price of a good and the quantity demanded Quantity Demanded a point on the demand curve and represents how much consumers buyers are Willing to buy at a particular price Law of Demand As prices increase quantity demanded decrease and as price decreases quantity demanded increases A Shifters of Demand eeea 1 Tastes amp preferences Fall maamana 2 Income eeee a Normal good as income increases demand increases E41393 b Interior good as income lg 1ncreases demand decreases E aeee 3 Prices of related goods a Substitute good as price of a substitute good falls demand for the good in question falls brand vs generic brand b Complementary good as price of a complementary good rises the demand for the F good in question falls 4 Number of buyers 5 Expectations price 211131 111111 e a a a a a a 1n Quantity Demanded in millliaral Shift in Demand Guwe Quantity demanded is a point that moves along the curve demand is the entire curve that can be shifted to the left or right Model of Supply Supply Curve A graph of the relationship between the price of a good and the quantity supplied Quantity Supplied the amount of a good that sellers are willing and able to sell Law of Supply the quantity supplied of a good rises when the price of the good rises A Shifters of Supply a 32 5 V2251 1 Input prices sum 2 Production of technology de mmm 3 Number of sellers Shiftair nwarda v by 4 Expectations E W A 5 I 2 v V 39V J Supply Emma I 39 v p v Shifts outwards 2mm 5239 Quantity supplied is a point that moves ma 5 along the curve supply is the entire curve 51 that can be shifted to the left or right i r5 quot3 a 1 Jim Quantity Supplied Uri minions Shift in Suppiy Curve Eguilibrium a situation in which the market PM price has reached the level at which quantity supplied equals quantity demanded Equilibrium price the price that balances EU39Fi39L39E39 quantity supplied and quantity demanded r I Equilibrium Quantity the quantity supplied and the quantity demanded at the equilibrium price Eule Surplus a situation in which quantity supplied is greater than quantity demanded Shortage a situation in which quantity Grimm demanded is greater than quantity supplied It ueElm unes Shifts in either supplydemand or both will result in a change of the equilibrium Example Changes in demand and consumer surplus Price Outward Shift in Demand Higher consumer surplus Puce Supply r I 0 r u Outward Shift in Supply Higher consumer surplus Consumer Surplus n b C CLEVZG39y No change in supply Increase in supply Decrease in supply No change in demand Price same Quantity same Price goes down Quantity goes up Price goes up Quantity goes down Increase in demand Price goes up Quantity goes up Price ambiguous Quantity goes up Price goes up Quantity ambiguous Decrease in demand Price goes down Quantity goes down Price goes down Quantity ambiguous Price ambiguous Quantity goes down This chart is to determine what happens to price and quantity when there is an increase in demandsupply or both Examples illustrated above
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