Review - Econ 251 Fall 2009 Review for Exam #1 9/22/09...

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Econ 251 Fall 2009 Review for Exam #1 9/22/09 1 Review for Midterm Exam #1 (Chapters 1-6) Chapter 1 – Introduction to Economics s Definition of Economics s Scarcity and incentives s Positive vs. normative statements o “ceteris paribus” s The four factors of production and incomes they earn: 1. Land b rent 2. Labor b wages 3. Capital b interest Does capital include money? NO!!! 4. Entrepreneurs b profits s Opportunity cost and sunk cost s Marginal Benefit and Marginal Cost b how it influences our economic decisions MB > MC => do it! MB < MC => don’t do it! Chapter 2 – The Economic Problem s Absolute advantage and Comparative advantage o Calculate absolute and comparative advantage o Rule of comparative advantage s Production Possibilities Frontier (PPF) o PPF Characteristics o Graphs s Efficiency: o Production Efficiency b on a graph of PPF, which points are efficient, inefficient, unattainable o Allocative Efficiency s Shifts in Production Possibilities Frontier b economic growth o Show Graphically o Factors that determine economic growth
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Econ 251 Fall 2009 Review for Exam #1 9/22/09 2 Chapter 3 - Demand, Supply and Market Equilibrium Demand s Demand Demand refers to the entire relationship between the price of the good and the quantity demanded of the good! Quantity demanded refers to a point on the demand curve! s Law of Demand s Changes in Demand shift in the demand curve changes in the quantity demanded (movement along the curve) s Factors changing demand 1. Income:
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Review - Econ 251 Fall 2009 Review for Exam #1 9/22/09...

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