ECON 2305 1st EditionExam # 1 Study Guide Chapters: 1 -6Chapter 1 (Exploring Economics)Important Economic concepts- incentives- marginal analysis- opportunity cost- information- the price system- Positive versus normative questionsChapter 2 (Production, Economic Growth and trade)Economic Systems- capitalism- resources, production and efficiencyProduction possibilities and Growth- Production possibility Frontier- Specialization, comparative advantage and tradeChapter 3 (Supply and Demand)- shortages- surplusesDemand- the law of demand- determinants of demandSupplyThese 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 supplyMarket Equilibrium- what happens when a surplus exists- what happens when a shortage exists- moving to a new equilibriumChapter 4 (Markets and Government)Markets- markets as efficient mechanisms for allocating resourcesConsumer and Producer Surplus- economic efficiency- consumer surplus- producer surplusConsequences of deviating from Market Equilibrium- total surplus- deadweight lossMarket FailureThe four major reasons for market failure- not enough competition- information problems- external benefits or costs- public goodsMarket failure and the Government- shadow supply and demand curves- tax- subsidy- tariffs- quotas- government controlled prices- price ceiling- price floorBastiat 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 fallacyChapter 5 (Introduction to Macroeconomics)- Stabilization Policy- business cycles- recessionThe circular flow diagramGross Domestic Product (GDP)- measuring GDP- imports- exports- Consumer Expenditure- Investment- Government ExpenditureChapter 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 numbersComparing wages/income/prices/output across time- real GDP- calculating economic growth rates- problems with inflation/deflationUnemployment- Who is employed- Who is unemployed- Who is in the labor forceTypes of Unemployment- frictional- structural- cyclicalThe Natural Unemployment