ECON 1: Topical Review for First Midterm (Chapters 1 - 5)



LAMC PACE ECON 1: Revised Topical Review for First Midterm (Chapters 1 - 4)

The following is a review of the topics we have covered and should serve as a review tool. The list may not be definitive.

1. Introduction to Economic Theory

Defined Economics

Defined Positive vs. Normative Analysis

Derived the Elements in the construction of Theory

Defined Marginal Analysis

2. Basis of Economics

Defined Goods, Scarce (Economic) Goods, Free Goods, Resources (Categories of)

Defined Basic assumptions of Scarcity

Derived Implications of Scarcity [Choice, Cost, Competition]

Defined Economic (Opportunity) Cost, accounting cost, sunk cost

Derived the Forms of Competition

Derived Implication: Life is Not Fair !

3. Reviewed ten economic principles in the areas of: (chapter 1)

A. Individual Decision making

B. How people interact

C. The Economy as a whole

3. Applied the principle of opportunity cost to production

Calculated opportunity cost from production possibilities table (chapter 3)

Defined and calculated Absolute and Comparative Advantage.

Analyzed the direction and result of specialization in production and potential for

trade

Introduced graphical analysis with the Production Possibilities Function or

boundary

Defined assumptions of analysis

Derived the function; Defined and calculated the slope

Analyzed the implications of negative slope, and concave shape

Derived implication of increasing marginal cost

Analyzed how changes in assumptions ( changes in implications

(i.e. Increases in resources; change in technology)

4. Derived the Circular Flow diagram of the Economy

Assumptions of household and firm decision making

Defined profit: ( = TR - TC

Defined product markets and resource markets and what is being exchanged

5. Defined the Money Supply

Analyzed the effects on production and Prices of ('s in Money supply

6. Focused on market activity (Chapter 4)

A. Defined Marginal Value

Derived diminishing marginal value (graph)

Defined a market

B. Derived and defined Demand (graph)

Derived the first Law of Demand

Defined Ceteris Paribus

Derived the four determinants of individual demand

Defined normal goods, inferior goods, substitutes, complements

Analyzed how changes in each determinant shifts demand

Derived market demand

C. Defined market Supply (graph)

Usually upward sloping due to increasing costs

Derived the determinants of supply (shift factors)

D. Market Adjustment to Equilibrium

Defined shortage and surplus

Analyzed how competition moves price to equilibrium

E. Analyzed how Demand determines Price

Analyzed how relative prices coordinate production and consumption decisions

F. Market Dynamics: Analyzed how ('s in demand and/or supply effect market

price and quantity exchanged  

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