Mid Term Study Guide

Mid Term Study Guide - ECO 202 - Mid Term Study Guide ....

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ECO 202 - Mid Term Study Guide Recognize how GDP is measured, whether by expenditures or incomes (chapter 5). Be familiar with inflation and how to measure it, either using the CPI or GDP inflator. Realize what nominal and real values measure (chapter 6). Know supply and demand basics (chapter 4). Use supply and demand to understand and to be able to analyze o The market for loanable funds (chapter 8) o The labor market (chapter 10). Be able to use the production function model to elucidate the sources of economic growth, paying particular attention to the role of saving and investment. Know the basic tools of finance (chapter 9). Appreciate the importance risk plays in shaping our saving decisions. Recognize the tradeoff between risk and return. Realize the value of diversification. Understand and be able to explain the reasons living standards vary geographically and through time: the ability to produce goods and services (chapter 7). . ECO 202 – Chapter 4 “The Market Forces of Supply and Demand” -Definitions- Competitive Market-a market in which there are many buyers and many sellers so that each has a negligible impact on the market price Complements- two goods for which an increase in the price of one leads to a decrease in the demand for the other Demand Curve-a graph of the relationship between the price of a good and the quantity demanded Demand Schedule-a table that shows the relationship between the price of a good and the quantity demanded Equilibrium-a situation in which the market price has reached the level at which quantity supplied equals quantity demanded Equilibrium Price- the price that balances quantity supplied and quantity demanded Equilibrium Quantity- the quantity supplied and the quantity demanded at the equilibrium price Inferior Good-a good for which, other things equal, and an increase in income leads to a decrease in demand Law of Demand- the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises Law of Supply- the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises Law of Supply and Demand- the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance Market- a group of buyers and sellers of a particular good or service Normal Good- a good for which, other things equal, and an increase in income leads to an increase in demand
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Quantity Demanded- the amount of a good that buyers are willing and able to purchase Quantity Supplied- the amount of a good that sellers are willing and able to sell Shortage- a situation in which quantity demanded is greater than quantity supplied Substitutes- two goods for which an increase in the price of one leads to an increase in the demand for the other Supply Curve-a graph of the relationship between the price of a good and the quantity supplied Supply Schedule- a table that shows the relationship between the price of a good and the quantity
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Mid Term Study Guide - ECO 202 - Mid Term Study Guide ....

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