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Name______________________________________ Economics Final Review Guide Final Exam Format - Questions will be Multiple Choice/Matching with some graphing and graph-based simple questions. There will be no short answer/essay questions. Introduction to Economics Vocabulary –1. needs-2. wants-3. Economics-4. scarcity-5. goods-6. services-7. shortage-8. entrepreneur-9. land-10. labor-11. capital-12. efficiency-13. underutilization-Intro to Econ Concepts 1. 3 Factors of Production 2 Types of capital 2. Trade-offs vs. Opportunity Costs 3. Thinking at the Margins 4. Law of Increasing Costs Economic Systems and The American Free Enterprise SystemVocabulary1. competition2. incentive3. self-interest4. market5. specialization6. consumer sovereignty 7. free enterprise8. private property rights9. profit motive10. standard of living11. CapitalismEconomic Systems Concepts 1. The 3 Economic Questions2. The 5 Economic Goals3. The 4 Main Economic Systems4.The Circular Flow Model for both the Free Market and the Mixed Economy systems. ( I will provide the illustrations on the exam- you will need to be able to answer questions based on the illustrations)Demand and SupplyVocabulary1. demand-2. normal good-3. inferior good-4. complement goods-5. substitute goods-6. elasticity of demand-7. supply-8. diminishing returns-9. elasticity of supply-10. subsidy-11. variable costs-12. fixed cost-Demand and Supply Concepts- 1.The Law of Demand-2. The Substitution Effect and the Income Effect- 3. The following factors that can affect demandIncome Effect – Normal Goods and Inferior Goods:Future Expectations of the Buyer : Related Goods – Complements and Substitutes:4. The difference between Elastic Demand and Inelastic Demand.5. The following factors for elasticity of demand35052001333500Availability of Substitutes: Necessity vs. Luxury:Relative Importance: Change over Time:6. The Law of Supply:7. The biggest factor in Elastic vs. Inelastic SupplyPrices and Equilibrium Vocabulary1. price 2. rationing 3. market equilibrium 4. surplus5. shortage 6. equilibrium price 7. price ceiling8. price floor Prices and Equilibrium Concepts-1. The 4 advantages of prices Neutral(Fair),Familiar,Flexibility, Free2. How the market would try to return to equilibrium in the following situations:Shortage of goods – Surplus of goods – 3. The effects of price floors and price ceilings on the marketMarket StructuresVocabulary1. collusion 2. product differentiation 3. externality 4. laissez-faire 5. oligopoly6. trust 7. negative externality-8. public good-9. Economies of Scale-Market Structures Concepts – 1. Perfect Competition, Monopolistic Competition, Monopoly, and Oligopoly- what they look like, and examples 2. Non-Price Competition (4 ways products are differentiated)3. 4 Types of Monopolies (with examples)4. 5 Market FailuresMeasuring the EconomyVocabulary1. price level 2. Discouraged worker 3. Underemployed4. price index5. market basket6. business cycle7. peak/trough8. recession9. inflationMeasuring the Economy Concepts-1. GDP- Formula 2. Real vs. Nominal GDP3. GDP Limitations (what it does not include)4. The 4 types of Unemployment –Seasonal-Frictional-Cyclical-Structural- (include 5 causes)5. Role of CPI in determining inflation6. The 3 Theories of Inflation Fiscal and Monetary PolicyVocabulary1. Budget surplus2. Budget deficit 3. Crowding out effect 4. Federal Advisory Council (FAC)5. Federal Open Markets Commission (FOMC) 6. Required Reserve Ratio (RRR)7. Money Multiplier Formula8. Excess reserves 9. Prime rate10. Open Market OperationsFiscal and Monetary Policy Concepts1. “Fiscal Policy”2. Expansionary vs. Contractionary policies 3. The limitations of Fiscal Policies 4. “Monetary Policy”5. The structure of the Federal Reserve System 6. How the Federal Reserve and the banking system can create money7. How the Federal Reserve uses reserve requirements, interest rates & open market operations to carry out monetary policy Graphing ConceptsProduction Possibilities Curve409702036830Study the graph to the right and answer the following questions. If Joe bakes 35 cakes, how many pies can he bake?What would Joe’s opportunity costs be if he decided to use all his resources to make 30 pies?How would the curve change if Joe hired 2 more bakers to help him in the kitchen? (draw the new curve)Supply/Demand CurvesKnow how to create and read a Demand Curve and a Supply Curve. Know the difference between a “change in quantity supplied/demanded” vs. “demand/supply shifts”When given a scenario, you will need to tell me how it will affect current supply/demand.-52070236855 Widget Demand Schedule00 Widget Demand SchedulePriceQty. Demanded$1.00400$2.00350$3.00300$4.00250$5.00200$6.001502255520635When the demand goes from 300 to 250 on the schedule above, is that a change in quantity demanded or a demand shift? Why? If the widgets were featured in a commercial during a popular kids show, what would likely happen to the demand for widgets? How would that be demonstrated on the demand curve?Graphing and Reading Supply / Demand Curves. Make sure you are able to do the following:A. Draw a supply and demand curve when given the supply and demand schedules.B. Analyze a given situation to determine if the supply or demand curves will shift up or down and be able to indicate that on a graph.C. Determine and label the point of equilibrium on a combined supply and demand curve graph.D. Read a supply and demand curve in order to answer questions regarding price, qty, and shifts in supply/demand.1. Graph the following Supply and Demand curve for CD’s. Be sure to label all parts.Supply and Demand Schedule For CDsPrice per CDQuantity Demanded(in millions)QuantitySupplied(in millions)$2010010001920090018300800174007001650060015600500 What is the equilibrium price for the above market?A new type of music storage/player system is introduced that produces better quality sound for a cheaper price. Which will this affect first in the CD market, supply or demand? Draw the shift on the graph above, be sure to label the new curve.What is the new equilibrium price and quantity for CD’s. ................
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