ECON Study Guide - Chapter 1 1 What goods and services will...

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Chapter 1: 1) What goods and services will be produced? 2) How will the goods and services be produced? 3) Who will receive the goods and services? In a centrally planned economy, most of these decisions are made by thegovernment. Percentage change = Value in the second period − Value in the first period × 100 Value in the first period Allocative efficiency, p. 10 Centrally planned economy, p.9 Economic model, p. 4 Economic variable, p. 12 Economics, p. 4 Equity, p. 11 Macroeconomics, p. 15 Marginal analysis, p. 7 Market, p. 4 Market economy, p. 9 Microeconomics, p. 15 Mixed economy, p. 10 Normative analysis, p. 14 Opportunity cost, p. 8 Positive analysis, p. 14 Productive efficiency, p. 10 Scarcity, p. 4 Trade-off, p. 8 Voluntary exchange, p. 10 Chapter 2: Adam Smith: 1776 book The Wealth of Nation-- in a free market where the government does not control the production of goods and services, changes in prices lead firms to produce the goods and services most desired by consumer
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*“invisible hand” argument that, in pursuing their self-interest, business people end up producing the goods and services most desired by consumers Absolute advantage, p. 46 Circular-flow diagram, p. 51 Comparative advantage, p. 47 Economic growth, p. 43 Entrepreneur, p. 53 Factor markets, p. 50 Factors of production, p. 50 Free market, p. 52 Market, p. 50 Opportunity cost, p. 39 Product markets, p. 50 Production possibilities frontier (PPF ), p. 38 Property rights, p. 54 Scarcity, p. 38 Trade, p. 44
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Chapter 3: SHIFT DEMAND CURVE: • Income • Prices of related goods (complements and substitutes) • Tastes • Population and demographics • Expected future prices *A change in quantity demanded refers to a movement along the demand curve as a result of a change in the product’s price SHIFT SUPPLY CURVE: •Prices of inputs (used in production of product) •Technological change •Prices of substitutes in production •Number of firms in the market
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