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Macro(overall final exam)

Macro(overall final exam) - 1 Econ 144 C Morris Topics to...

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Econ 144 – C. Morris Topics to that you are responsible for on Exam I (Ch. 1- 5) Ch. 1 – Ten Principles of Economics Def. of Economics: is the study of how society manages its scarce resources. In most societies, resources are allocated not by an all-powerful dictator but through the combined actions of millions of households and firms.( Thus, Economics is the study of how people make choices under conditions of scarcity and the results of those choices ) Principles 1- 6: Scarcity → choice is necessary → opportunity cost Definition of opportunity(def: this is what you give up in order to get that item.) cost and how to determine opportunity cost in different scenarios Decisions made at the margin by comparing marginal benefit(The benefit that arises from a small increase in activity) with marginal cost(The cost of a small increase in an activity) People respond to incentives Market Economy – how resources are allocated using market mechanism. Price and changes in prices are used as the method for allocating scarce resources. Ch. 2 – Thinking Like an Economist Def. of Micro(the study of how households and firms make decisions and how they interact in markets) and Macro(the study of economywide phenomena, including inflation, unemployment, and economic growth) Positive(claims that attempt to describe the world as it is) vs. Normative(claims that attempt to prescribe how the world should be) Production Possibility Frontier: Inputs are labor, capital, human capital, entrepreneurial ability; Meaning of curve (max. possible produced at a given amount of other good); Efficient, inefficient, and unattainable points; Opportunity cost of producing one more unit of good A in terms of the amount of the good B that must be given up; Ch. 3 - Interdependence and Gains from Trade Be able to do a numerical example with linear PPF’s and find the following: Absolute advantage(the ability to produce a good using fewer inputs than another producer) for each trader Comparative advantage(the ability to produce a good at a lower opportunity cost than another producer) for each trader What determines who should specialize in which good? Direction of trade – who buys good A and who sells it. Similarly for the other good, B. Does total output increase with specialization and trade? Whenever opp. costs differ, how will trade make both parties (countries) better off. Ch. 4 – The Market Forces of Demand and Supply Definition of demand curve(a graph of the relationship between the price of a good and the quantity demanded) Law of Demand(the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises) Definition of Market Demand Curve( To get the market demand curve, we add up the quantity demanded by each individual at a given price and this will be the total quantity demanded in the market at that price.) 1
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Variables held constant on a given demand curve Definition of normal good(a good for which, other things equal, an increase in income leads to an
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Macro(overall final exam) - 1 Econ 144 C Morris Topics to...

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