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Unformatted text preview: Midterm Study Guide (according to lecture) Chapter 1: The Art and Science of Economic Analysis ~ 9 Questions P.2: 3 Questions – What is economics? o The study of how people use their scarce resources to satisfy unlimited wants o Scarcity and the administration of scarcity Factors of Production o Labor: physical and mental effort used o Capital: buildings, equipment, and human skill o Natural resources: gifts of nature: renewable and exhaustible o Entrepreneurial ability: managerial and organizational skills + risk taking P.3: 2-3 Questions o What is the meaning of “entrepreneur”? The entrepreneur tries to discover and act on profitable opportunities by hiring resources and assuming the risk of business success or failure o What is scarcity? Scarcity: occurs when the amount of people desire exceeds the amount available at a zero price Why scarcity? B/C we have unlimited wants P. 4-5: ~2 Questions – Circular Flow of Income o Households/consumers o Corporations/firms o Circular flow model : a diagram that outlines the flow of resources, products, income, and revenue among economic decision makers o Transaction through price o Price is a major determinant between households and firms What is marginal? o Incremental, additional, or extra; used to describe a change in an economic variable o Additional/extra unit to buy in consumption or production P. 7: ~2-3 Questions – o What is microeconomics? The study of the economic behavior in particular markets, such as that for computers or unskilled labor o What is macroeconomics? The study of the economic behavior of entire economies 2 Questions – What is the meaning of Capital? o The buildings, equipment, and human skill used to produce goods and cervices What is an economic model? o A simplification of reality used to make predictions about cause and effect in the real world P.10: Positive vs. Normative Statement o Positive economic statement: a statement that can be proved or disproved by reference to facts o Normative economic statement: a statement that represents an opinion, which cannot be proved or disproved Chapter 2: Some Tools of Economic Analysis P.28-29: 2 Questions – What is Opportunity Cost? o The value of the best alternative forgone when an item or activity is chosen o Alternative choices P.32: What is barter economy?...
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This note was uploaded on 03/24/2008 for the course ECON 205 taught by Professor Kamrany during the Spring '07 term at USC.
- Spring '07