Econ 1BB3 AD-AS Model
1. Draw a diagram showing a closed economy that is currently in a recession. What is
true about the unemployment rate in this economy?
2. A closed economy begins in long run equilibrium. A terrorist attack causes consumer
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
Use the figure below to answer the following question(s).
Table 3.4 Demand and Supply Schedules for Cups of Coffee each day at CoolU.
THINKING LIKE AN ECONOMIST
Why can economics be difficult?
Express ideas in economics:
1) English language
2) Algebra/ equations
3) Diagrams/ graphs
Translate between the different forms of
Economics is a Social Science
7Principles of Economics
What is Economics?
Labour, Physical Capital
focuses on the individual parts of the
Comes from the Greek Mikros meaning little or small.
measure of how much buyers and sellers
respond to changes in market conditions.
measures how responsive Qd or Qs is to
changes in price, income or prices of
Elasticity of Demand
Price elasticity of demand,
SUPPLY AND DEMAND
Market: a group of buyers and sellers of a
Buyers (consumers) determine demand.
Sellers (firms, producers, suppliers) determine
Supply and Demand: behavior of people as
they interact with one
10 Principles of Economics:
1. People face tradeoffs
Give up one thing to gain another
Guns and Butter
2. The cost of something is what you give up to get it
i. Whatever must be given up to obtain some item
Why is the Inflation rate 2.5% in Canada but 19% in Venezuela?
November 4, 2011
Classical theory of inflation
Price of a good reflects value
Money value falls as the price level rises
Demand for money (households) as prices rise we need more money to b
Why is inflation bad for the economy?
November 4, 2011
There are 3 ways for a government to raise revenue:
1. Direct Taxes
2. Borrowing future tax
3. Printing Money tax on money
Hyperinflation is inflation that exceeds 50% p
What is a small open economy?
November 14, 2011
Interest rates in a small open economy
Open economy: allows goods, services and capital to flow across borders freely
Small open economy (SOE): not large enough to affect world interest rates or world
Term Test #1
This examination paper includes 13 pages including the title page and 43 questions. You are responsible for ensuring that your copy of the paper is complete. Please bring any discrepan
Should I spend my money now or save for a rainy day?
October 5, 2011
Example: your father earned $40,000 in 1982. What is this salary worth in 2010 dollars?
116.3/61.8 = x/40,000
x = (116.3) (40,000)/61.8
Is my MasterCard an asset?
October 28th, 2011
Money: an asset regularly used to buy goods and services (stock variable)
o Money has 3 funcitons:
1. Medium of exchange (generally used)
2. Unit of account
3. Store of value
Liquidity: ease with which
Is a government budget deficit bad for a small open economy?
November 16, 2011
2 SA (drawing diagram) (12 or 13), (14 or 15)
Half (12, 13, 14, 15)
Model of a small open economy
Q of LF
The market for foreign-currency exchange
September 23, 2011
What Affects Your Decision To Go To The Movies?
Markets: Group of buyers and sellers
There are four types of market and structure:
1. Perfect Competition lots of buyers and sellers (no influence over price)
2. Monopoly one seller who de
The uncompensated impact of one persons
actions on the well-being of a bystander.
Positive externality: benefit that is enjoyed by
society, but society doesnt pay to receive it.
Negative externality: cost suffered by
Consumers, Producers and the
Efficiency of Markets
Welfare economics: the study of how
the allocation of resources affects
Equilibrium in the market results in
maximum benefitsmaximum total
Topic 9: Monopoly:
Monopoly and market power:
one seller of a product one and only
its product does not have close substitutes
the firms is a price setter to maximize their profit
Why monopolies arise:
bc of barriers to entry (4 sources of t
Micro Exam Review and Tips for the Final Exam
There are 75 Multiple Choice (MC) Questions.
Out of 75 Questions, you will see 10 graph-related questions and 5 equation-based
questions and 4 tables-numbers-based questions
3 MC Questions
Thursday November 26, 2015
Bubble a (True), if the statement is true and bubble b (False), if the statement is false.
There are few firms producing identical products in monopolistic competition and
entry-barriers allow existing firms
Regular Quiz #3
Thursday November 12, 2015
50 True-False Questions
Select the correct choice
The firm in a perfectly competitive market is currently producing 10 units of
output, where AC is at the minimum value of $10.
The current market-pri
Chapter 6 Quiz
1. Ralph and Lauren are shopping for polo shirts when Lauren finds a shirt that
is pink with blue horses on it and really is interested in buying the $100 shirt
over the polos on sale. What type of need is Lauren conveying?
a. Functional Ne
September 24, 2005
Consider each statement and write True (T) if the statement is true and write False (F) if
the statement id false.
A concave (from origin) production possibility curve (PPC) with two goods (X
and Y) implies that the opportuni
Regular Quiz #2
October 22, 2015
Use Answer Key page and circle True, if the statement is true and circle False, if the
statement is false.
Answer Questions #1-4 on the basis of the following demand and supply functions,
where Q stands for quant
Mini Quiz #1
Circle aif the statement is true; circle b if the statement is false.
Microeconomics deals with aggregate demand for all goods and services.
Bowed out (concave from origin) production possibility curve (PPC) implies incr
Public Goods and Common
Now we turn our focus to goods and
services supplied by the public sector.
Consumers do not have to pay for these
goods they are provided for use for free
Price which normally allocates resour
Supply, Demand and Government
Usually enacted when policymakers believe
the market price is unfair to buyers or
Government will freeze prices at a
predetermined level they feel will make
society better off.
GAINS FROM TRADE
Suppose there are 2 people in the economy:
The potato farmer, and
The meat rancher.
Only two goods are produced: potatoes and
meat, and each person can produce both
Minutes Needed to
Make 1Kilogram of:
What will happen to Walmarts everyday low prices if their workers unionize?
September 26th, 2011
Prices will go up
Quantity Supplied (Qs): the amount of a good that sellers are willing and ABLE to sell
The variables that influence how much sellers