Econ 2305 Exam # 1 Study Guide Lectures: 1 - 7Lecture 1 (Jan 15)Economics is defined as social science dealing with the use of scarce resources to meet unlimited material wants. Scarcity is a condition where production ingredients are not enough to satisfy the wants at zero price.Questions that drive the economic system:I. What do we produce?II. How do we produce?III. Who will receive?Different types of economic systems:Command/Central based economy Free Market/CapitalismMixed SystemLecture 2 (Jan 17) Resources are an essential part of the economic system Types of resources: Human and Property. Human resources include labor, entrepreneurial ability and human capital. Property includes land, economic capital and manufactured aid to production. Goods are objects that give happiness/satisfaction to the consumers Economic goods are goods that have higher quantity demanded than supply at zero price.Services involve getting mental or physical assistance. Wants and needs are two different concepts. Lecture 3 (Jan 22)Opportunity cost is the value of the next best alternative. Productions possibilities curve represents possible maximum outputs, having a fixed amount of productive resources of a given quality. Inefficiency is shown by a point under the curve.Impossible outputs are above the curve. Technology, resources and more efficiency can shift the curve outward or inward. Lecture 4&5 (Jan 24&27)Macro Goals include: Full employment, price stability, increased standard of living, freedom of choice, safety for sick and elderly and international trade. Law of demand states that there is a negative, inverse relationship between the price of a good and the quantity demanded, when everything else is held constant.Demand curve is a graphical representation of the law of demand. It is a negative sloped line, showing the inverse relationship between price and quantity demanded. Income, taste or preference, expectations, number of buyers and price of related goods can cause a right or left shift in the demand curve and these factors are called the non-price determinants of demand. Any movement up or down the demand curve is change in the quantity demanded and any right or left shifts of the demand curve is the change in the demand. Law of Supply states that there is a positive, direct relationship between price and quantity supplied and so the higher the price is, the more quantity will be supplied, as long as the other things are held constant. Supply curve is the graphical representation of the law of supply and it’s a positive slope, as longas other things are held constant. Cost of input materials, technology, price expectations, taxes and subsidies and number of producers are the non-price determinants of supply and they shift the supply curve to the right or the left. Any movement up or down the supply curve is change in quantity supplied and any shift of the supply curve to the right or left of the curve is change in the supply. Equilibrium is a point in time where the quantity demanded equal quantity supplied at a specificprice. Shortage is a point below the equilibrium where quantity demanded is greater than quantity supplied. Surplus is a point above the equilibrium where the quantity demanded is lesser than the quantity supplied. Lecture 6 (Jan 31)Price Ceiling is a legal maximum price that may be charged for a particular good or service. Examples include rent controls and gasoline prices. Price floor is the legal minimum legal price below which a good or service may not be sold for example minimum wage. Lecture 7 (Feb 3)Inelastic: When the price increases and the quantity demanded only increases by a small degreeand the elasticity is less than 1.Unitary: When the price and the quantity demanded increases by the same amount and the elasticity is equal to 1. Elastic: When the price increases but the quantity demanded increases by a greater amount andthe elasticity is more than 1. Elasticity can be calculated by a simple formula or a mid-point formula which will give a more accurate number. Elasticity can be determined by income, substitutes, price, time and