midterm 1 study guide

midterm 1 study guide - Microeconomics CHAPTER 1: Scarcity...

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Microeconomics CHAPTER 1: Scarcity and Choice there are limited goods and services so we must decide on what we will have and what we will let go. Opportunity Cost to obtain more of 1 thing society sacrifices other goods and services that could’ve been worked on. Utility the pleasure, happiness, or satisfaction obtained from consuming a good or service Marginal Analysis: Marginal Benefit extra, utility gained Marginal Cost extra cost added between new and old service or good Macroeconomics: focuses on the economy as a whole, its basic subdivisions (collection of specific economic units treated as one unit) i.e govt, houseolds, Microeconomics: concerned with individual units such as person, or household, or firm Positive Economics focuses on facts and cause –and effect relationships, tries to establish scientific statements about economics (What is?) Normative Economics looks at the desirability of certain aspects and uses value judgements(What Ought to be?) Individual’s Economizing Problem: Limited Income salary decides how to spend money Unlimited Wants desire unlimited things that bring utility Budget Line schedule or curve that shows various combinations of two products that consumer can purchase with specific money income Society’s Economizing Problem: Resource Categories: 1) Land 2) Labor 3) Capital 4)Entrepreneurial Ability Production Possibilities Curve: schedule or curve that shows the different combination of goods and services that society can produce in a fully employed economy assuming citrus paribus Law of Increasing Opportunity Cost: as production of a particular good increases so does the opportunity cost of producing an additional unit. Optimal Allocation: optimal output= MB=MC, MB must be great than MC in order to expand and reduced if MC exceeds MB CHAPTER 2: Command Economy: government owns most of the property resources and economic decisions making occurs through a central economic plan (communism, socialism Market Economic System: characterized by private ownership of resources and the use of markets and prices to
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This note was uploaded on 05/05/2008 for the course ECON 203 taught by Professor Al-sabea during the Spring '05 term at USC.

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midterm 1 study guide - Microeconomics CHAPTER 1: Scarcity...

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