Course Outline and Review Sheet
Each week’s lectures are summarized by the following core ideas. Also listed are key terms (to help learn the vocabulary
of economics) and weekly
that consist of end-of-chapter
textbook (note these are not the end-of-chapter
). You should be able to solve these questions after
listening to lectures and reading the text each week. Answering these questions will prepare you for the kinds of
questions you will see on exams and quizzes.
People face trade-offs because resources are limited.
Choosing one alternative over another generates both costs and benefits.
Rational people make “how much” decisions at the margin.
People make decisions by comparing costs and benefits; they respond to incentives.
opportunity cost, productive efficiency, allocative efficiency, rationality, equity, marginal cost,
marginal benefit, sunk cost
Week 1 PROBLEM SET:
Chapter 1 – Problems 5,6,8,14, Chapter 1 Appendix – Problems 2,3,4,5,6
Production Possibilities Frontier:
An economic model to deepen understanding of some of the basic
principles developed last week.
Gains from Trade:
Improvements in income, production or satisfaction owing to the exchange of goods or
The free determination of prices and the free exchange of goods and services characterize a
market economy; normally markets are a good way to organize economic activity.
opportunity cost, equity, comparative advantage, efficient, absolute advantage, inefficient,
Week 2 PROBLEM SET:
Chapter 2 – Problems 1,4,5,11,12,14
Demand and Supply Model:
This model explains why the interaction between the cost of production and
the value to the buyer are important in understanding market activity.
The intersection of the supply and demand curves determines the equilibrium. Markets
generally move toward equilibrium where there are no unexploited opportunities for individuals.
Changes in Market Conditions:
Shortages or surpluses occur when demand and/or supply change, thus
causing a change in the equilibrium price and equilibrium quantity.
demand curve, supply curve, equilibrium, competitive market, substitutes, complements
Week 3 PROBLEM SET:
Chapter 3 – Problems 11,12,14,20,21,23