ECON+101+First+midterm+RS+Monica+-+Ctools

ECON+101+First+midterm+RS+Monica+-+Ctools - ECON 101 First...

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ECON 101 First midterm Review Session GSI : Monica Hernandez Feb 5 2011 Thanks to June Kim who did the original version of this presentation
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Agenda 1. Opportunity cost and Tradeoff 2. PPF 3. Supply and Demand curve 4. Elasticity 5. MB and MC 6. CS and PS 7. Externality
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1. Opportunity cost Opportunity Cost: Value of the next best good/service forgone Formula that you need to know!: Opportunity cost of Y= Unit: the other good! It’s just a slope of PPF Drawing PPF makes it easy to figure out the Opportunity cost between X and Y What is PPF? - Production Possibility Frontier. - maximum amount of one good that can be obtained for any specified production level of the other good
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1. Opportunity cost • Feb 2010 Midterm no.33 - Economy produces only corn and sugar - Technology of producing corn improved - Maximum amount of corn that can be produced: 600 700 - New regulation on sugar production - Maximum amount of sugar that can be produced: 400 300 - Before and After these changes, production occurs at (550 corns , 250 sugars) - Opportunity cost of increasing corn? - Opportunity cost of increasing sugar?
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Feb 2010 Midterm no.33 1. Opportunity cost 550 700 600 250 400 300 corn sugar Slope got steeper after change Opportunity cost of increasing sugar by 1 unit: increased (directly related with the slope) Opportunity cost of increasing corn by 1 unit: decreased (inversely rel. with the slope).
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2. PPF PPF is always downward sloping : Because there is always tradeoff between two goods! The steeper the slope, the greater the OC of one unit of X : Meaning, you have to give up greater amount of the other good to get one extra unit of one good. e.g) Going to the football game vs. having a date on Saturday afternoon If PPF is a line, then OC is constant.
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Increase in both resources 2. PPF can shift! 700 600 250 300 cookie cake Change in Technology in cookie 700 600 250 300 cookie OC of cake rises, and OC of cookie falls at every pt cake
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3. Supply and Demand Analysis P ($) Q 3 4 5 55 70 40 10 25 6 7 2 1 D P ($) Q 3 4 5 55 70 40 10 25 6 7 2 1 Move along the Demand curve: change in price of the good itself Shift the Demand curve: change in price of other good, Income, number of consumers, Consumer’s preference, etc Increase in the quantity demanded Increase in demand
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3. Supply and Demand Analysis P ($) Q 3 4 5 55 70 40 10 25 6 7 2 1 S P ($) Q 3 4 5 55 70 40 10 25 6 7 2 1 Move along the Supply curve: change in price of the good itself Shift the Supply curve: change in technology, number o f producers, change in cost o f production, etc Increase in the quantity supplied Increase in supply
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• Oct 2009 Midterm no.17 •Competitive market for surf boards • You observed an increase in equilibrium Price and a decrease in equilibrium Quantity • Which of the following could have directly caused this change?
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ECON+101+First+midterm+RS+Monica+-+Ctools - ECON 101 First...

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