ECO 201 Final Exam Study Guide

ECO 201 Final Exam Study Guide - Econ 201 Final Exam Study...

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Econ 201- Final Exam Study Guide Chapter 1 Scarcity - the wants of people cannot be fully satisfied Resources - things used to produce goods and services People and labor ( L ) Kapital ( K )- anything used to produce a good or service that has already been produced Land ( L )- anything given by nature (dirt, coal, rivers, etc) Human Kapital- skills are “produced” and put to use Land Kapital- improved land, already processed and made better Economic Society - must decide what to produce , for who, and how ? Institutions - ways society can be organized Traditional- what your family produced; persists over time Central planning- produce g & s to satisfy wants (need info, incentives---use prices to convey this information) Opportunity cost - whatever must be given up to obtain some item (6, 25) Marginal changes - small incremental changes adjustments to a plan of action (6) Market economy - an economy that allocates resources through the decentralized decisions of many firms and households they interact in markets for goods and services (9). Market power - the ability of a single economic actor (or small group) to have substantial influence on market prices (11). A monopoly or firm that does not face much competition Productivity - the quantity of goods and services produced from each hour of a workers time (12). Inflation - an increase in the overall level of prices in the economy (12). Business cycle - fluctuations in economic activity such as employment and production (13). Chapter 2 Circular Flow diagram - a visual model of how money flows through firms and households (22).
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Production Possibilities frontier - graph that shows the combinations of output that the economy can possibly produce given available factors of production and production technology (24). Chapter 3 Absolute advantage - the ability to produce a good using fewer inputs than the other producer (52). Comparative advantage - the ability to produce a good at a lower opportunity cost that the other producer. Chapter 4 Market - a group of buyers and sellers of a particular good or service (64). Competitive market - a market where there are many buyers and sellers so that each had a negligible impact on the market price (64). Quantity demand - the amount of a good that buyers are willing and able to purchase (65) Law of demand - the claim that the quantity demanded of a good falls when the price of a good rises (65). Demand schedule - a table showing the relationship between the price of a good and the quantity demanded (65). Demand curve - a graph of the relationship between the price of a good and the quantity demanded (66)
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Normal good - a good for which an increase in income leads to an increase in demand (a car)(68). Inferior good - a good for which an increase in income leads to a decrease in demand (bus rides) (68).
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