Exam Summary
Week 1 - micro
Economic Agent = any group of people that make choices
Economics = the study on how economic agents make choices among scarce
resources
Macro-economics = the entire economy
Micro-economics = individual firms, governments, individuals
3 principles of economics
Optimisation
Making the best choice possible
Opportunity Cost
Optimising in levels
Express costs and benefits in same unit
Calculate net benefit (benefit - cost)
Choose option with highest net benefit
Exam Summary 1
, Marginal analysis
Optimising in differences
Express costs and benefits in same unit
Calculate how cost and benefit change as you move from option to option
Apply Principle of optimisation at the margin
Choose option that makes you better when moving towards it, and worse off by
moving away
Equilibrium, demand, supply
No one would be better of with a difference response
Perfectly competitive market → no buyer/seller big enough to influence price +
identical goods
Competitive equilibrium → when buyer/seller agree to a price and quantity
Excess demand (shortage) → buyers want more than sellers offer
Excess supply (surplus)→ buyers want less than sellers offer
Exam Summary 2
, Shifts in demand curve
taste & preference
income & wealth
availability & price of
goods
number & scale of buyers
buyers’ expectation of
future
Empiricism → scientific method
Using data to answer interesting questions
Models
Not exact
Generate predictions that are tested with data
Causation Correlation
When one things happens directly When two things are related
after the other
Tall people → heavier
Pulling all-nighter → tired
Omitted variable
Ignoring something that contributes cause and effect
Exam Summary 3
Week 1 - micro
Economic Agent = any group of people that make choices
Economics = the study on how economic agents make choices among scarce
resources
Macro-economics = the entire economy
Micro-economics = individual firms, governments, individuals
3 principles of economics
Optimisation
Making the best choice possible
Opportunity Cost
Optimising in levels
Express costs and benefits in same unit
Calculate net benefit (benefit - cost)
Choose option with highest net benefit
Exam Summary 1
, Marginal analysis
Optimising in differences
Express costs and benefits in same unit
Calculate how cost and benefit change as you move from option to option
Apply Principle of optimisation at the margin
Choose option that makes you better when moving towards it, and worse off by
moving away
Equilibrium, demand, supply
No one would be better of with a difference response
Perfectly competitive market → no buyer/seller big enough to influence price +
identical goods
Competitive equilibrium → when buyer/seller agree to a price and quantity
Excess demand (shortage) → buyers want more than sellers offer
Excess supply (surplus)→ buyers want less than sellers offer
Exam Summary 2
, Shifts in demand curve
taste & preference
income & wealth
availability & price of
goods
number & scale of buyers
buyers’ expectation of
future
Empiricism → scientific method
Using data to answer interesting questions
Models
Not exact
Generate predictions that are tested with data
Causation Correlation
When one things happens directly When two things are related
after the other
Tall people → heavier
Pulling all-nighter → tired
Omitted variable
Ignoring something that contributes cause and effect
Exam Summary 3
