reviewsheet1spring2004

reviewsheet1spring2004 - Econ 102 Midterm 1 List of topics...

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Econ 102 Midterm 1 – List of topics This is not meant to be a complete list, but is instead a guideline of many of the topics covered. Professor Kelly reserves the right to question material that is not listed here, or that is found in your text but was not covered in the large lecture. Please review your notes carefully, work the practice questions, and take care of yourself physically and mentally in preparation for the exam. If you need additional questions remember to check the website for help: www.ssc.wisc.edu/~ekelly/econ102 . 1. Core Ideas Some Definitions Economics – the study of the allocation of scarce resources Macroeconomics – the study of the aggregate behavior of individual economic agents Positive Economics – the study of how the economy behaves Normative Economics – the benchmarking of how the economy should be Reasons for market failure Externalities – a situation when the market fails to fully account for all benefits and/or costs (e.g., a firm pollutes and the cost of this pollution is not included in this firm’s cost of production: the firm will produce more than is socially optimal since it does not consider all of its costs) Public Goods -a good that is non-rival (more than one person can consume the good without diminishing the consumption benefits that are available to another person) and non-excludable (a person can enjoy the public good without paying for the good) (e.g. Free-riding on public goods – once provided, public goods are free for anyone, and everyone can use them in a non-rival, non-excludable fashion. However, people may want to wait for others to provide the public good (they free ride) rather than playing an active role in providing the public good. If enough people free ride the public good will not be provided.) Income Distribution Issues – The market may fail to provide a distribution of income that is deemed equitable
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Macroeconomic Instability – Market interaction does not guarantee the attainment of low levels of inflation, high levels of employment, and a sufficient growth rate of the economy Demand and Supply
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reviewsheet1spring2004 - Econ 102 Midterm 1 List of topics...

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