ECON 2305 1st Edition Exam 1 Study Guide Chapters 1 6 Chapter 1 Exploring Economics Important Economic concepts incentives marginal analysis opportunity cost information the price system Positive versus normative questions Chapter 2 Production Economic Growth and trade Economic Systems capitalism resources production and efficiency Production possibilities and Growth Production possibility Frontier Specialization comparative advantage and trade Chapter 3 Supply and Demand shortages surpluses Demand the law of demand determinants of demand Supply These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute the law of supply determinants of supply Market Equilibrium what happens when a surplus exists what happens when a shortage exists moving to a new equilibrium Chapter 4 Markets and Government Markets markets as efficient mechanisms for allocating resources Consumer and Producer Surplus economic efficiency consumer surplus producer surplus Consequences of deviating from Market Equilibrium total surplus deadweight loss Market Failure The four major reasons for market failure not enough competition information problems external benefits or costs public goods Market failure and the Government shadow supply and demand curves tax subsidy tariffs quotas government controlled prices price ceiling price floor Bastiat Notes Cash for Clunkers The new car market The used car market Profits for the auto industry The Japanese cash for clunker program Bastiat s broken window fallacy Chapter 5 Introduction to Macroeconomics Stabilization Policy business cycles recession The circular flow diagram Gross Domestic Product GDP measuring GDP imports exports Consumer Expenditure Investment Government Expenditure Chapter 6 Price Indexes Inflation and GDP Measuring inflation and Unemployment the aggregate price level price index consumer price index personal consumption expenditure producer price index GDP deflator Important uses for index numbers Comparing wages income prices output across time real GDP calculating economic growth rates problems with inflation deflation Unemployment Who is employed Who is unemployed Who is in the labor force Types of Unemployment frictional structural cyclical The Natural Unemployment rate