ECON 102 DAVE BROWN EXAM 1 STUDY GUIDE
Costs and Benefits, economic analysis - Answers -used in decision making
Choices - Answers -result of scarcity
Self Interest and Rationality - Answers -never intentionally hurt selves
Incentives - Answers -a reward or punishment for engaging in a particular activity -
matter and do affect decision making
Scarcity - Answers -not enough to freely give everyone all wants
Definition of economics - Answers -how to deal with scarcity - allocate resources
resources and wants - Answers -things used to produce goods and services to satisfy
people's wants
what people would buy if their incomes were unlimited (anything of value)
micro vs macro economics - Answers -small vs big, aggregate
study of decision making undertaken by individuals and by firms vs. study of the
behavior of the economy as a whole
economics as a science - Answers -empirical
data, numbers, predictions
economic models - Answers -meant to simplify and explain complex reality
predict how people act, not how they think
ceteris paribus - Answers -all other things equal
goal: study the variable at hand
positive vs normative - Answers -can be tested vs opinion
purely descriptive statements or scientific predictions vs analysis involving value
judgements or opinions (whether things are good or bad)
types of economies - Answers -market - prices and quantities set in relatively free
market
command/central planned - government makes all decisions
economies are mixed
direct and inverse relationship - Answers -direct - positive slope
inverse - negative slope
, production - Answers -any activity that results in the conversion of resources into
products that can be used in consumption
inputs --> output goods
inputs - Answers -land, labor, physical capital (K - manufactured resources, machines,
buildings, mechanical equipment etc.), human capital (training/education),
entrepreneurship
tradeoffs and opportunity cost - Answers -next best foregone alternative
value of trade off is represented by opportunity cost
production possibilites curve (PPC) - Answers -represents all possible maximum
combinations of total output that can be produced
point on the PPC - efficient
point inside the PPC - inefficient
point outside the PPC - unattainable (for now)
economic growth - Answers -PPC shifts out
more or better resources
consumer goods - Answers -goods produced for personal satisfaction
capital goods - Answers -goods used to produce other goods - produce these to get
more consumer goods in future
specialization and division of labor - Answers -firm chooses what it is best at
rational individuals choose their comparative advantage and specialize (assembly line) -
increases productivity
absolute advantage - Answers -can produce more output with the same input
comparative advantage - Answers -ability to produce a good or service at a lower
opportunity cost
when producing X, who gives up the least Y?
create gains from trade
benefits of trade - Answers -more overall output
consume variety of goods
definition of markets - Answers -arrangements that individuals have for exchanging with
one another
buyers and sellers
demand:
quantity demanded
demand schedule
Costs and Benefits, economic analysis - Answers -used in decision making
Choices - Answers -result of scarcity
Self Interest and Rationality - Answers -never intentionally hurt selves
Incentives - Answers -a reward or punishment for engaging in a particular activity -
matter and do affect decision making
Scarcity - Answers -not enough to freely give everyone all wants
Definition of economics - Answers -how to deal with scarcity - allocate resources
resources and wants - Answers -things used to produce goods and services to satisfy
people's wants
what people would buy if their incomes were unlimited (anything of value)
micro vs macro economics - Answers -small vs big, aggregate
study of decision making undertaken by individuals and by firms vs. study of the
behavior of the economy as a whole
economics as a science - Answers -empirical
data, numbers, predictions
economic models - Answers -meant to simplify and explain complex reality
predict how people act, not how they think
ceteris paribus - Answers -all other things equal
goal: study the variable at hand
positive vs normative - Answers -can be tested vs opinion
purely descriptive statements or scientific predictions vs analysis involving value
judgements or opinions (whether things are good or bad)
types of economies - Answers -market - prices and quantities set in relatively free
market
command/central planned - government makes all decisions
economies are mixed
direct and inverse relationship - Answers -direct - positive slope
inverse - negative slope
, production - Answers -any activity that results in the conversion of resources into
products that can be used in consumption
inputs --> output goods
inputs - Answers -land, labor, physical capital (K - manufactured resources, machines,
buildings, mechanical equipment etc.), human capital (training/education),
entrepreneurship
tradeoffs and opportunity cost - Answers -next best foregone alternative
value of trade off is represented by opportunity cost
production possibilites curve (PPC) - Answers -represents all possible maximum
combinations of total output that can be produced
point on the PPC - efficient
point inside the PPC - inefficient
point outside the PPC - unattainable (for now)
economic growth - Answers -PPC shifts out
more or better resources
consumer goods - Answers -goods produced for personal satisfaction
capital goods - Answers -goods used to produce other goods - produce these to get
more consumer goods in future
specialization and division of labor - Answers -firm chooses what it is best at
rational individuals choose their comparative advantage and specialize (assembly line) -
increases productivity
absolute advantage - Answers -can produce more output with the same input
comparative advantage - Answers -ability to produce a good or service at a lower
opportunity cost
when producing X, who gives up the least Y?
create gains from trade
benefits of trade - Answers -more overall output
consume variety of goods
definition of markets - Answers -arrangements that individuals have for exchanging with
one another
buyers and sellers
demand:
quantity demanded
demand schedule
