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REVIEW TOPICS FOR FIRST EXAM - Why does Government...

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REVIEW TOPICS FOR FIRST EXAM Chapter 1 Definitions of: Scarcity Economics Opportunity cost Factors of production Market mechanism/invisible hand Laissez faire Mixed economy Market failure Government failure Macroeconomics Microeconomics 3 basic questions economics tries to answer: What to produce How to produce For Whom to produce Production possibilities schedule and curve Optimal mix of output Efficient mix of output Market mix of output Chapter 2 Definitions of: GDP Real GDP Nominal GDP Per capita GDP Economic growth Income transfers Investment Progressive tax Regressive tax
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Chapter 2 continued How do economists measure output? The components of GDP: Household consumption Business investment Government purchases and services Net exports Why is America so productive?: Capital stock Factor quality Factor mobility
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Unformatted text preview: Why does Government intervene?: Legal framework Protect consumers Protect labor Protect environment Chapter 3 Definitions of: Utility Factor market Product market Demand Supply Demand schedule Demand curve Supply schedule Supply curve Ceteris Paribus Market demand Market supply Market participants and their goals: Consumers – maximize utility Business firms – maximize profits Government-- maximize social welfare Foreigners-- maximize utility and/or profit Chapter 3 continued Law of demand Law of supply 5 determinants of demand 6 determinants of supply Change in demand vs. change in quantity demanded Change in supply vs. change in quantity supplied Equilibrium vs. surplus vs. shortage Price ceilings Price floors...
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