Exam 1 Study Guide - ECON 2301 Exam 1 Study Guide...

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ECON 2301- Exam 1 Study Guide Comparative advantage - specialization and free trade will benefit all trading parties; even those who have absolute advantage efficiency Factors of production - inputs into production process: land, labor, capital Pareto efficiency - 2 person economies; situation where it is impossible to make one person better off without making someone else worse off Opportunity cost - the best alternative that we forgo, or give up, when we make a choice or decision Economic way of thinking- Scientific method - observation, hypothesis, test Net benefits principle - maximize benefits Gains from trade - what each party gains by specializing and trading… outside of their own ppf Production possibilities frontier - graph that shows all combinations of goods and services that can be produced if all of society’s resources are used efficiently Goods market - demand determined by consumers; supply determined by producers (output market) Factor market - demand determined by producers; supply determined by consumers (input market) Determinates of demand - income, wealth, prices, tastes and preferences, expectations Determinates of supply - cost of production, prices of related products Law of demand - negative relationship between price and quantity demanded: as price rises, quantity demanded falls; as prices fall, quantity demanded rises
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Exam 1 Study Guide - ECON 2301 Exam 1 Study Guide...

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