Download Economics 2012: Review # 1

Economics 2012: Review # 1
Chapter 1
Definitions
Macroeconomics
Standard of Living
*Ceteris Paribus
Economics
Positive Economics
Cost of Living
Invisible Hand
Scarcity
Microeconomics
Normative Economics
Opportunity Cost
Economic Decision Rule (MB > MC)
Economic Policy
Be Able To:
Distinguish positive economic statements from normative economic statements.
Identify whether an issue is microeconomic or macroeconomics.
To describe in detail the opportunity cost of an action.
Chapter 2
Definitions:
Production Possibilities Frontier
Increasing Opportunity Cost
Externalities
What to produce?
Opportunity Cost
Constant Opportunity Cost
Comparative Advantage Outsourcing
Public Goods
Free Riders
How to produce?
For whom to produce?
Be Able To:
Work in detail with a production possibilities curve:
Explain what a production possibilities curve identifies.
Identify and explain points of efficiency, inefficiency and unattainability.
Calculate opportunity cost -- and explain if it is increasing, decreasing or constant.
Explain the ceteris paribus assumptions regarding the ppc, and what factors will shift the ppc.
Describe the roles of the government in the economy.
(Don’t worry about the material on trade and comparative advantage – pp. 32-34)
Appendix A
Definitions
Inverse relationship
Direct relationship
Slope
Be Able To:
Calculate the slope of a straight line.
Identify inverse and direct relationships by looking at a graph.
Explain what an inverse or direct relationship indicates about the two variables.
Chapter 3
Definitions
Business
Profits
Households
Socialism
*Trade Surplus
Sole Proprietorships
Limited liability
Income
*Government Deficit
*Trade Deficit
Partnerships
Double Taxation
Wealth
*Government Surplus
Corporations
Circular Flow model
Capitalism
*National Debt
Be Able To:
Identify the transactions that take place in our circular flow model.
Discuss the patterns of government revenue and expenditures.
Explain the patterns of the distribution of income and wealth.
Briefly explain the “What?” “How?” and “For whom?” questions and how each is answered in a capitalist economy?
Describe the three forms of business ownership. Which produces more? Which category do most businesses fall in?
What are the pros and cons of the types of business ownership?
Chapter 4
Definitions
Demand function
Quantity demanded
Inferior Goods
Supply function
Quantity supplied
Excess demand
Demand schedule Demand Curve
ceteris paribus
demand shift factors
substitutes
complements
Supply schedule
Supply Curve
supply shift factors
Equilibrium
Law of Demand
Normal Goods
Law of supply
Excess supply
Be Able To:
Explain the inverse relationship between price and quantity demanded.
Explain the direct relationship between price and quantity supplied.
Explain what happens to price when there is excess supply or excess demand.
Explain the dynamic process by which supply and demand reach equilibrium.
Distinguish between shifts in the curves from movements along the curve.
Identify all of the factors that can shift supply and demand, and show the shift graphically.
Identify what will happen to equilibrium price and quantity when ceteris paribus variables change.
Chapter 5
Definitions
Price Ceiling
Excise tax
Price floor
Tariff
Minimum wage
Quota
Be Able To:
Describe and show graphically the effects of price ceilings and price floors.
Describe and show graphically the effect of an excise tax on a product.
Rent Control
Exchange rate