review - Economics 101 December 2005 Wei Zhang Final Exam...

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1 Economics 101 December 2005 Wei Zhang Final Exam Review Topics The following has been prepared to give you an overview of the topics for which you are responsible. Exam material is not limited to material mentioned herein– Rather, these are simply the overarching themes present in the semester’s course work. For further resources, guidance, or questions, please see your TA. 1. Trade: (Problem Set 2) Production Possibilities Frontier (PPF) Drawing PPFs given information about technology and resources Using PPFs to find comparative and absolute advantage Finding the relationship between PPF slope and opportunity cost. Comparative Advantage Definition Determining who has comparative advantage, given a description of technology What does comparative advantage imply about gains from trade? Absolute advantage Definition What is the relationship to comparative advantage and gains from trade? Gains from Trade Why do countries trade? Are there always gains from trade? What should countries import vs. export? 2. Consumer Choice (Problem Set 3) Utility and Marginal Utility: Definitions Budget constraint Algebraically (How would you write down a budget constraint, given prices and income?) Graphically (How would you draw a budget constraint, given prices and income?)
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2 Slope = -P x /P y How does the budget constraint change when: 1. Prices change? 2. Income changes? Indifference curves How are utility and marginal utility illustrated with indifference curves? Four Properties of Indifference Curves Special Cases: Complements and Substitutes Slope = -MRS = -MU x /MU y Optimality of a Consumption Bundle Graphically (Tangency of Indifference Curve and Budget Constraint) Algebraically: MUx/Px = MUy/Py XPx + Y Py = I (spend all money) Intuitively (Bang for the Buck) What should a consumer buy more/less of if she is not consuming optimally? Normal versus Inferior Goods
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This note was uploaded on 07/28/2010 for the course ECON 101 taught by Professor Hansen during the Fall '07 term at Wisconsin.

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review - Economics 101 December 2005 Wei Zhang Final Exam...

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