Econ Final Review

More questions than normal

Chapter 3
Chapter 10
Chapter 11
Chapter 12
Chapter 19
**Not many calculationsmore concept based

Chapter 1 (not a lot of questions)

Factors of productionwhat they are
Understand opportunity cost
Production possibilities curvewhat shifts and where you are on it
(efficiency, economic growth)
Know what ceteris paribus means

Chapter 2 (not a lot of questions)

Know how we measure stuf
o Per capita
o GDP
Externalities

Chapter 3 (spend some time with)

Circular flow diagram
Individual demand
o Demand curve
o Demand schedule
o Law of demandwe want more when the price goes down
o Market demand (Downward sloping demand)
Individual demand sometimes faces horizontal demand
curve
Distinguish move along curve vs. shifts
o Movement:
 Price
o Anything else that changes, shifts the curve
Tastes
Income
Other goods
Expectations
# of buyers
o Normal Goodshifts right Inferior goodshifts left.
Does it afect demand or supply? Which curve will move?
Law of supplyas we increase the price, supply decreases and vice
versa
Curve slopes upward
Price moves along curve
Factors that SHIFT curve:
o Technology
o Factor costs
o Other goods
o Taxes/subsidies
o Expectations
o Number of sellers
Equilibrium= Demand and Supply are equal
Price ceilings and price floors
Normal and Inferior goods
Compliment and substitute goods
o Compliments = peanut butter and jelly
o Substitute = cofee vs. tea

Elasticity: Price of gas plummetswont change my behavior dramatically

in the short run because youre stuck with a bigger car once the gas prices
rise again. But the elasticity increases as time passes and the prices stay
low.
More time = more elastic
E of demand = % change in quanitity demanded / % change in price.
o 20% / 10% = 2
Chapter 4 (not a lot of timeadditional coverage elsewhere)
Role of Government
Market failure
o Externalities
Understand that market fails because it doesnt see the
whole picture (whole cost or benefit from a societal
standpoint)
o Public Good
o Market Power (monopoly or natural monopoly)
Private vs. Public Goods
Progressive, Proportion, Regressive taxes
o More in this with chapter 19
Free Riders

Chapter 5 (some stuff in chapter gets used other placesdont spend

too much time)
Consumer choice
Utility theory
o Marginal Utility
o Total utility
o Law of Diminishing returnslots of output as we increase
labor slows down and eventually tops out and decreases
Market demand Demand for autoworkers based on demand for
autos
o Drives demand back to those recourses
Consumer Surplusextra benefit from the people willing to pay
more for the extra labor
Consumer and producer surplus = Total surplus
Price discrimination

Chapter 6 (Spend some time on!!!!)

Elasticity
Memorize formulas (dont have to do calculations but tells you whats
 going on)
Cross-price elasticity
Income elasticitytells us about normal and inferior goods
Demand elasticity
Demand curve is steeprelatively inelastic
o At a price change, there is a SMALL quantity change
Total Revenue and relationship to price elasticity

Chapter 7
Costs of Production
Marginal productivity vs. marginal product
Economic costs vs. accounting costs
Implicit vs. Explicit costs
AFC, ATC, AVC
There is no absolute on short run
o Period of time where something is fixed
As long as something is fixed, I cant change capacity
Long runeverything is fair gameeverything can change.
Economies of scale
Marginal Cost