ECON 102 Study Guide - Fall 2018, Comprehensive Midterm Notes - Inflation, Labour Economics, Interest Rate
ECON 102
MIDTERM EXAM
STUDY GUIDE
Fall 2018
ECON 102
David K.
Chapter 1
Four Concepts of Econ
1. Trade Offs: if you do one you can’t do the other; don’t tell you what to do just
give you a set of choices
(classic economic tradeoff)
Set of choices: ↙
Work vs School Guns vs Butter
Military Domestic
Sometimes trade offs exist that you don’t even know about
Efficiency vs Equity
Getting the most out of something Fairness
with the least effort
For ex: taxes, minimum wage
Scarcity
Economics: study of how to efficiently distribute scarce resources
Unanticipated trade offs: ex is Ralph Meter, made government federally mandate
seat belts and it resulted in more car accidents/deaths
2. Opportunity Cost: a number or thing, quantifiable, what you give up to get
something else.
ex: retirement vs spend it now
3. Marginal Analysis
Margin→ incramented steps
Marginal analysis→ thinking in baby steps
Different from fixed cost because regardless of if you have 1 employee or 12,
rent is the same
Marginal Benefit: Marginal Cost:
additional benefit gained by additional cost gained by
increasing by 1 unit increasing by 1 unit
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Marginal Benefit > Marginal Cost DO IT
Marginal Cost > Marginal Benefit DONT DO IT
Marginal Benefit = Marginal Cost STOP, DO IT BUT NO LOWER
4. Incentives: reason for you to do something
Can be positive and negative
Backbone of econ
5. Government Role
*ENFORCE PROPERTY RIGHTS AND UPHOLDS RULE OF LAW
Everything else is a by product
Fundamental economist Adam Smith “act in self interest and the other person is
better off” is the most efficient way
6. Market: a place where buyers and sellers meet
-When you facilitate an exchange you have valued what you bought more than
what you’ve paid (vice cersa)
-We all become better off by acting in our best interest
find more resources at oneclass.com
find more resources at oneclass.com
