Final Study Guide

Final Study Guide - CONCEPT RESPONSIBILITY FOR FINAL EXAM...

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CONCEPT RESPONSIBILITY FOR FINAL EXAM The final exam will cover the following concepts. Concepts shown in boldface involve computations and/or graphs for which you are likewise responsible. CHAPTER 2, pages 32-34, 40-41 Production Possibilities Frontier- The boundary between those combinations of goods and services that can and cannot be produced. slope, curvature. *Production efficiency occurs at points on the PPF Opportunity cost- Highest-valued alternative forgone [The amount of “A given up to produce 1 more “B”] ^ Decrease in the quantity produced of “A” / Increase in the quantity of “B” ^ Law of increasing opportunity cost- PPF is out warded bowed because resources are not all equally productive in all activities. Comparative advantage - If a person can perform an activity at a lower opportunity cost than anyone else. Absolute advantage- If a person is more productive than others in all activities. Marginal Cost- Opportunity cost from producing one more unit CHAPTER 3, pages 59-75 Demand vs. Quantity demanded *Law of demand- The higher the price of a good, the smaller the quantity demanded Demand curve - [Downward Sloping] A shift of the demand curve happens when any factor other than price that influences buying plans changes. A Move along the demand curve happens when the price changes- And all other factors are the same. Substitutes - A good that can be used in place of another good. [If the price of a substitute rises, demand increases.] Complements - A good that can be used in conjunction with another good. [Hamburgers-Fries][If the price of price of a complement falls demand increases.] --- ----- --- --- --- --- --- --- ----- --- --- --- ---- --- ---- ---- ---- --- --- ---- Supply vs. Quantity supplied. *Law of supply- The higher the price of a good, the greater the quantity supplied. Supply curve- A shift of the supply curve [Change in Supply] happens when any factor of selling plans other than price of the good changes. A Move along the supply curve shows a change in quantity supplied. Market equilibrium - Occurs where the demand and supply curve intersect [Quantity D=Quantity S] Shortage - Occurs when Demand is greater than Supply – Price rises until equilibrium Surplus - Occurs when Supply is greater than Demand – Price decreases until equilibrium CHAPTER 4, entire (see summary on page 99)
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Price elasticity- [Percentage change in quantity demanded / Percentage change in price] Perfectly Elastic - Infinity [The smallest possible increase in price causes an infinitely large decrease in demand.] Elastic - Less than infinity [Percentage decrease in quantity demanded exceeds the percentage increase in price by more than 1.] Unit Elastic - The percentage decrease in the quantity demanded equals the percentage decrease in price Inelastic - Less than 1 but greater than 0 [The percentage decrease in quantity demanded is less than the percentage increase in price.] Perfectly inelastic - Zero [The quantity demanded is the same at all prices.] Effect of Price change on Total Expenditure (Total Revenue)-
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This document was uploaded on 10/26/2011 for the course ECO 201 at Miami University.

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Final Study Guide - CONCEPT RESPONSIBILITY FOR FINAL EXAM...

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