Download Unit 2

Review Sheet for Unit Two
Exam
ABOUT THE NOTE CARDS: You are allowed – and encouraged – to create and use
a note card (one side) to help remember concepts. This must be hand-written
and completely original. Photocopies and/or computer printouts will not be
allowed. Do this by hand, and do your own work. Failure to follow these rules will
result in an immediate, and non-negotiable, failure (ZERO) on this quiz. ALL
NOTECARDS WILL BE COLLECTED AND STAPLED TO YOUR QUIZ.
CONCEPTS AND POLICIES: Be able to identify each of the following and explain their importance:
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Demand (Defined)
o What is it?
o Why is gauging it necessary?
o Producer or consumer based?
Demand Curves
o Individual
o Market
o (How are both figured?)
o Examples
The Law of Demand
o Inverse relationship between price and demand.
o As applied to the market demand.
Marginal Utility (The Too Many Hot Dogs Idea)
o What is it?
o Principle of diminishing utility.
o Examples.
Factors affecting demand.
o Change in the quantity of demand.
 Income effect
 Substitution effect.
 Examples.
Change in Demand
o Explain it.
o Causes:
 Income
 Tastes
 Style
 Good Ads
 Bad PR
 Obsolete
 $ Change in related product
 Substitute
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Complement
 EXAMPLES
Consumer expectations:
 Future
 Examples
Number of Buyers.
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Elasticity:
o What is it?
o How can you recognize it mathematically (0.0 to 1.0; 1.0 – infinity)
o Elastic goods
 Examples
 Why?
o Inelastic goods
 Examples?
 Why?
o Unitary elastic.
 Defined?
 Why?
Supply
o Define it.
o The Law of Supply
o Individual Supply Curve
o Market supply curve.
o Which way does it slope?
o Producer or consumer based?
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Change in Quantity Supplied
o Define it.
o Producers have freedom to:
 Slow/Stop Production (for what reason?)
 Leave market
 Raise Production levels (Why?)
Change in the Supply:
o Define it
Factors that can cause a change in supply:
o Cost of inputs
o Productivity levels
o Technology
o Taxes (or level of subsidies)
 Know what a subsidy is.
o Expectations
o Govt. Regulations
Theory of Production
o Marginal product
o Stages of production (1-3)
o The paper airplane lesson – what does this show us?
Price:
o Economically, what is this, and how is it determined?
(6.2) The Price system at work
o The price adjustment model.
 EQUILIBRIUM PRICE
 Finding it on a chart
o SHORTAGES
o SURPLUS
Predicting prices based on a:
o Change in Supply
o Change in Demand
o Change in supply and demand
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Importance of elasticity
TOTAL CHAPTERS: 4.1, 4.2, 4.3, 5.1, 5.2, 6.1, 6.2