Download ECONOMICS 2306

ECONOMICS 2306
REVIEW SHEET FOR EXAM I
The following is a thorough but not exhaustive list of the concepts you need to have mastered
for the exam. You should know definitions of terms; formulas and how to use them;
graphs, what they represent, and how to draw and read them; tables of data and how to work
with them.
CHAPTER 1
Economics, scarcity, and choice
Resources and payments to resource owners
Economic decision makers and their roles in the economy; the circular flow model
Product and resource markets
The meaning of each of the following terms: marginal analysis; microeconomics;
macroeconomics; economic model; positive and normative economic
statements
Graphs: positive and negative relations between variables; slopes and how to
calculate them; shifting of lines
CHAPTER 2
Absolute and comparative advantage: definitions; calculating opportunity costs to
determine comparative advantage; the law of comparative advantage; the
importance of specialization and exchange
Production possibilities frontier: definition; points on, inside, and outside the PPF;
reason for shape of PPF
Movement along the PPF; opportunity cost; law of increasing opportunity cost
Causes of shifts of the PPF
Economic systems and their characteristics
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CHAPTER 3
Demand and quantity demanded: law of demand; explanations of the law of demand;
constructing a demand curve; movements along the demand curve; factors that
shift the demand curve; when to use the term “demand” and when to use
“quantity demanded”; normal and inferior goods; substitutes and complements
Supply and quantity supplied: law of supply; constructing a supply curve; movements
along the supply curve; factors that shift the supply curve; when to use the
term “supply” and when to use “quantity supplied”; relevant resources;
alternative goods
Market equilibrium, equilibrium price, equilibrium quantity; surplus, how to measure
a surplus on a graph, market adjustments to correct a surplus; shortage, how to
measure a shortage on a graph, market adjustments to correct a shortage
Changes in equilibrium price and quantity when the demand curve shifts; changes in
equilibrium price and quantity when the supply curve shifts; changes in
equilibrium price and quantity when both curves shift simultaneously
Price floors and ceilings: definitions, how to depict them on a graph, results and how
we deal with them
CHAPTER 5
Price elasticity of demand: definition; short and long formulas and calculations;
definitions of elastic, unit elastic, inelastic, perfectly elastic, and perfectly
inelastic demand and shapes of the demand curves; relationship between
elasticity and total revenue; how to interpret ED values; determinants of price
elasticity of demand
Price elasticity of supply: definition; short and long formulas and calculations;
definitions of elastic, unit elastic, inelastic, perfectly elastic, and perfectly
inelastic supply, and shapes of the supply curves; how to interpret ES values;
determinants of price elasticity of supply
Income elasticity of demand: definition; short and long formulas and calculations;
signs (+ or -) and their significance; how to interpret IED values
Cross-price elasticity of demand: definition; short and long formulas and calculations;
signs (+ or -) and their significance; how to interpret CPED values
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CHAPTER 6
Utility: definition; total utility; marginal utility; law of diminishing marginal utility
Utility maximization when there is no scarcity
Utility maximization when there is scarcity: marginal utility per dollar spent;
consumer equilibrium and how to find it; deriving the law of demand from
marginal utility
Consumer surplus: definition; calculation
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