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Download Review of Topics: Economics 101, Part 1
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Review of Topics: Economics 101, Part 1 Chapters1, 2, 3, 8 What is Economics? Study of allocation of scarce resources to satisfy wants. • • • • • • • • • • Microeconomics versus macroeconomics Resources Scarcity Prices and scarcity Opportunity cost Wants versus needs Efficient production means value outweighs opportunity costs Allocation mechanisms: Command, Mixed and Market economies Role of property rights in market economies Examples: Cookies and milk, assigning classroom seats, international index of economic freedom Economics Tools • • • • Basics: algebra, slopes, graphs Positive versus normative analysis Economic Models: simplified views of the world o Assumptions o Prediction o Testing by Observation o Accept, reject, or modify the model How graphs can be misleading Resource Constraints • • • production possibility frontier: defined by resources and technology Attainable, efficient and unattainable combinations Opportunity costs, specialization, and the shape of the production possibility frontier Role of Trade • • • • • • • • Individual Production: resources and skills Opportunity cost and the slope of the production possibility frontier Comparative advantage- produce at lowest opportunity cost Absolute advantage - produce using fewer resources Specialization and trade Specialization and the rise of firms Barter vs monetary economies The role of money in trade • • • • • Specialization and the rise of civilization What shifts the Production Possibility Frontier? Economic Growth: Debt, consumption, investment, savings Principle of increasing opportunity costs or diminishing returns Why we may produce at inefficient points inside the production possibility frontier International Trade • • • • • • • • • • NAFTA, DR-CAFTA, FTAA Facts on exports, imports and balance of trade Major trading partners Gains from trade Absolute advantage versus comparative advantage Sources of comparative advantage Can trade increase employment? Tariffs, quotas, technical restrictions GATT and World Trade Organization Is NAFTA bad for the U.S.? Market Demand and Supply • • • • • • • • • • • • What is a market? Market supply curves Market demand curves Equilibrium price and quantity Things that shift supply curves Things that shift demand curves Complements and Substitutes Normal and inferior goods Excess supply Excess demand Path to equilibrium Forecasting price and quantity
