FinReviewComp - Final Review - Comprehensive Ch.1 One of...

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Final Review - Comprehensive Ch.1 One of the key conclusions from Market Theory is market participants (buyers and sellers) acting out of their own self-interest could result in a socially optimal outcome if certain assumptions are met. Normative – subjective, includes opinion Positive – objective, fact only Ch. 2 The PPC helps analyze a nations output by looking at the production tradeoffs for two goods. What else does a PPC show? Tradeoffs are also called the opportunity cost, and this lost output shows scarcity (as do the unattainable points). Efficiency on curve. Inefficiency inside. Unattainable outside. PPC asks the question, What combination of these two goods should be supplied? Progressive, Proportional, and Regressive taxation:What happens to effective t-rate in ea (3 types) of taxation as you move up the income ladder? Ch. 3 Advantages and disadvantages of 1. Sole Proprietorships 2. Partnerships 3. Corps E.g., relative to corps, SPs and Partnerships have far less access to capital (both in Quantity and the range of investment options available) Ch. 4 Demand determinants Income Tastes Prices of other goods (Complements and substitutes) Expectations of the future price of the good Market population Price changes influence Qd 1
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Supply determinants Technology improvement Input prices Prices of alternative goods Expectations of the future price of the good # firms in industry Tariff, sales or excise tax (S1 still exists for S, but D sees Sat) Price changes influence Qs Ch. 5 1. Rent control and other forms of government intervention through price controls (floors and ceilings that –when effective and binding- cause surpluses and shortages, respectively) 2. Protectionism through quotas or tariffs 3. Those who benefit and those who are hurt by specific instances of both 1. and 2. above. 4. Third-Party payer markets Ch. 6 Unemployment Structural Frictional Seasonal Compose the “Natural Rate,” the economy’s built in percentage jobless that indicate a dynamic economy running at capacity. Anything above the “Natural Rate” (“Full Employment”) is Cyclical -Corresponds with the business cycle Relation of Natural Rate to FEGDP. (=Y*) Calculating U-Rate Calculating LF particip rate Ch 7 National Income Accounting 2
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Output excluded from GDP: Illegal Volunteer Household (chores, construction, cooking/cleaning/driving) Transactions excluded from GDP: Gov’t Transfers (welfare, fs, ss) aka income stabilization to households Intermediate or used goods Financial Instruments (stocks bonds options mutuals etc.) Some increases in GDP worsen well-being. Most increases in GDP improve well-being,
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This note was uploaded on 12/11/2011 for the course ECON 1 taught by Professor Farin during the Spring '10 term at Foothill College.

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FinReviewComp - Final Review - Comprehensive Ch.1 One of...

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