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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