ReviewSheet_Summary_Ch1-14 - PRINCIPLES OF MACROECONOMICS...

PRINCIPLES OF MACROECONOMICS
LUBA KETSLER
FINAL EXAM – COMPREHENSIVE, COVERING CHAPTERS 1 THROUGH 14
REVIEW SHEET
CHAPTER 1
 TRY TO FOCUS ON UNDERSTANDING THE FUNDAMENTAL ECONOMIC
CONCEPTS:
o SCARCITY – resources, time, land, labor, capital, economics is the study of
scarcity
o OPPORTUNITY COST – the best alternative that we forgo or give up
o SUNK COSTS – is not measured in the equation, what you put in and do not
receive in return
o MARGINALISM – with each additional unit
o EFFICIENCY – 2 ways, in econ you want to be allocable efficient, what people
want at the lowest possible price, producing efficiently on the PPF, in a free
market profit is eliminated almost instantaneously
o EQUITY – a fancy word for being fair
CHAPTER 2
 THE ECONOMIC PROBLEM: WHAT GETS PRODUCED? HOW IS IT PRODUCED?
WHO GETS IT? GIVEN SCARCE RESOURCES, HOW EXACTLY DO LARGE,
COMPLEX SOCIETIES GO ABOUT ANSWERING THESE THREE BASIC
QUESTIONS?
TO ATTAIN? HOW DOES TECHNOLOGY PLAY A ROLE IN THIS?
CHAPTER 3 – THIS CHAPTER IS SPLIT BETWEEN UNDERSTANDING DEMAND &
SUPPLY
 UNDERSTAND THE CIRCULAR FLOW OF ECONOMIC ACTIVITY

 KNOW THE FACTORS OF PRODUCTION: LAND, LABOR, CAPITAL
DEMAND
 CHANGES IN QUANTITY DEMANDED VS. CHANGES IN DEMAND
o QUANTITY DEMANDED: REFERS TO A CHANGE IN PRICE, LEADS TO A
MOVEMENT ALONG THE CURVE
o CHANGES IN DEMAND: CHANGES IN ANY OTHER FACTOR SUCH AS
INCOME, PREFERENCES, LEADS TO A SHIFT OF THE DEMAND CURVE
 KNOW THE LAW OF DEMAND: NEGATIVE RELATIONSHIP BETWEEN PRICE AND
QUANTITY DEMANDED.AS PRICE RISES, QUANTITY DEMANDED DECREASES,
AND VISA-VERSA.
 KNOW THE SHAPE OF THE DEMAND CURVE, UNDERSTAND WHAT IT MEANS TO
DERIVE A MARKET DEMAND CURVE: MEANS THAT YOU ADD UP INDIVIDUAL
DEMAND CURVES
 UNDERSTAND THE DIFFERENCE BETWEEN
o INCOME – a flow measure
o WEALTH – the accumulation of income over time
 KNOW THE TERMS: NORMAL GOOD, INFERIOR GOODS, SUBSTITUTES,
COMPLIMENTS
SUPPLY
 CHANGES IN QUANTITY SUPPLIED VS. CHANGES IN SUPPLY
o QUANTITY SUPPLIED: REFERS TO A CHANGE IN, LEADS TO A MOVEMENT
ALONG THE CURVE
o CHANGES IN SUPPLY: BROUGHT ABOUT BY CHANGES IN THE ORIGINAL
CONDITIONS, LEADS TO A SHIFT OF THE SUPPLY CURVE
 KNOW THE LAW OF SUPPLY: POSITIVE RELATIONSHIP BETWEEN PRICE AND
QUANTIY OFGOODS SUPPLIED. AN INCREASE IN MARKET PRICE WILL LEAD TO