Econ 200 Review_for_Midterm_1_Aut_07

Econ 200 Review_for_Midterm_1_Aut_07 - Study Tips for...

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Study Tips for Midterm 1 Econ 200 – Winter 2007 Daniel Willard We have covered a great deal of material already this quarter, so I thought I would condense what I think are some major topics, and offer some key points for you to review. Read through these, and review the concepts in your text and notes to help you prepare. A caveat: this is NOT an exhaustive list of all concepts for which you are responsible. This is meant to be a general guide only. Here are some review guidelines to help you succeed… 1. “The Meaning of Value” – Section 2.2-2.3 - Understand the distinction between total value and total expenditure, and that total value is how we measure what something is “worth” to society. How is TV different from MV, and how do you calculate them numerically? 2. Consumer Surplus – Section 2.3-2.4 - Know how to calculate consumer surplus numerically (TV-TE, evaluated at quantity where p=MV), and how to show it graphically (the triangle area below the demand curve, but above the market price). Understand that this is the difference between what we would be willing to pay to consume some quantity of a good (TV) and what we actually do pay (TE). - Study Tables 2-1 and 2-2, and how they relate to each other. That is, how can we use Table 2-1 to derive 2-2? - Why do we voluntarily make purchases? Because we receive benefits from the exchange. Consumer surplus represents these benefits (gains from exchange). More consumer surplus is preferred to less, because then there are more “excess gains” left over to consume other goods. - Remember that consumer surplus is how we measure the “benefits” of consuming at one price versus another price. Often, when a question asks “how much better off is somebody consuming some good at a price of $x versus $y,” it is asking you to compute the difference in consumer surplus at the two prices, just as with your quiz problem. 3.
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This note was uploaded on 04/28/2008 for the course ECON 200 taught by Professor Ta during the Spring '07 term at University of Washington.

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Econ 200 Review_for_Midterm_1_Aut_07 - Study Tips for...

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