Econ Prelim 1 Review - Econ Prelim 1 Review 23/09/2009...

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Unformatted text preview: Econ Prelim 1 Review 23/09/2009 15:23:00 TOPIC 1 ECONOMIC THINKING Economics Definition o The science of how individuals in society deal with unlimited wants and limited resources Analysis o Process of applying economic tools & economic thinking to real world problems and opportunities Scarcity & Choice Purchases of goods and services Utility and disutility o provided by goods and services o Its usefulness in production in other foods and services Factors of Production o Land Space, resources of that land o Labor Unskilled or skilled management o Capital Effective machines which produce other machines (ovens, building, items in room) o Entrepreneurship Rewarded for risk and skills to do that Brings them all together Price Rations o Scarcity and choice- how do we decided who get swhat? o Ex: ebay, highest bid gets it Economic Thinking Opportunity cost o The most highly valued alternative forfeited when a choice is made o What you give up Theories and Models (can abstract representation of the world ***the value of a model is how well it predicts Decided what you want to predict identify the variables state the assumptions state the hypothesis test the theory by comparing its predictions vs. real events o evidence supports it- keep it o evidence rejects it- start over Scientific Thinking Association vs. Causation o Link between cause and effect Fallacy of Composition o Whats good for individual may not be good for the whole Ceteris Paribus o Assumption: everything be equal Sales as a Function of Advertising See page 1 charts Can express graphically, with words, or equations Slope of a line: change in S/change in A o (relative marginal change in the dependent variable) S=sales A=advertising Expressing Economic Concepts: Market Supply and Demand Example Written or Verbal Representation: o 1. The quantity demanded of a service will increase as the market decreases, CP o 2. The quantity supplied of a service will increase as the market price increases, CP o 3. CP, Market equilibrium occurs when the quantity of service supplied at a given price is equal to the quantity consumers are willing to buy at that same price everything constant except price Graphical Representation: o See page Functional Representation o P=Price Q=Quantity D=Demand S=Supply 1. Qd= f (P, Ps, Pc, Y, K) for the demand function (D) check over equations set Qd and Qs equal to each other TOPIC 2 ECONOMIC SYSTEMS Production Possibilities Exchange-processing of trading one thing for another...
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This note was uploaded on 09/25/2009 for the course HOTEL Ho Ops taught by Professor Rmccarthy during the Fall '09 term at Cornell University (Engineering School).

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Econ Prelim 1 Review - Econ Prelim 1 Review 23/09/2009...

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