review 1(5) - Econ 162-A1 A2 Fall 2015 Kenny Christianson exam date October 9 REVIEW SHEET FOR MIDTERM ONE*PPC problem set#1 problem 5 Concepts to know

review 1(5) - Econ 162-A1 A2 Fall 2015 Kenny Christianson...

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Econ 162-A1, A2 Kenny Christianson Fall 2015 exam date: October 9 REVIEW SHEET FOR MIDTERM ONE *PPC problem set #1, problem 5 Concepts to know for midterm: normal and inferior goods – normal goods are goods that will be bought regularly and if income increases more normal goods will be bought. Opposite for inferior economics – the study of the choices that arise from scarcity. Model building process to simplify the world scarcity – when there is a limited amount of resources in a market complements – a good that goes well with another good. Indirect relationship between price of complement and demand of other good substitutes – a good that can replace another good. Direct relationship between price of substitute and demand of other good determinants of demand – price of the good, price of substitutes and complements, income, tastes and expectations, population determinants of supply – price of the good, price of resources, technology, business expectations, number of firms in the market, prices of related goods technology INPUT/resources (land, labor, capital, entrepreneurship) OUTPUT/goods & services (rent, wage, interest, profit) microeconomics – the study of individual decision-making by households and firms and how they interact in markets macroeconomics – the study of aggregate economic variables and they affect each other shortage – when the quantity demanded is greater than the quantity supplied surplus – when the quantity demanded is less than the quantity supplied positive economics – descriptions of fact normative economics – the statement of opinions price floor – government sets a minimum price above the market price causing a surplus price ceiling – government sets a maximum price below equilibrium causing a shortage economic good – a good that has value due to scarcity

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