Economics Review Chapters 1-5Chapter 1 List and be sure you understand the 7 principles from chapter 11.2.3.4.5.6.7.Chapter 2- What role does scarcity play in economics? - What is meant by the concept of opportunity costs and why is it so important in economics? How does it differ from the normal concept of costs? - Understand how economics is a science and the importance of assumptions- Understand the basics of the circular flow diagram- Understand what the ppc shows and what concepts it illustrates.- What is the normal shape of the ppc and why is it shaped the way it is?- Distinguish between points inside ppc, points on and points outside ppc.- What factors would cause a shift in the ppc both in and out?- Macroeconomics vs. Microeconomics- Positive vs. Normal economics Chapter 3- Understand the difference between absolute and comparative advantage- What is meant by comparative advantage and when does a country have it?- Understand how to illustrate the gains from trade.- Why do countries trade?- Chapter 4 -Supply and Demand:- Understand what is meant by a competitive market- Understand relation between Price and Quantity Demanded and Quantity supplied. Understand the difference between a movement along the curve and a shift in the curves.- Understand the difference between an individual curve and a market curve- Know and understand the different factors that shift both demand and supply.- Understand what is meant by equilibrium and why it is that the market always returns to an equilibrium. (ie shortages and surpluses)- Understand how changes in equilibrium come about and what happens if there is a change in demand, supply or both.- Chapter 5 -Elasticity.o Understand the concept of elasticity, what it measures and how to interpret it- Understand the difference between elastic and inelastic goods and what factors determine the size of elasticity.- Know the midpoint method of calculating elasticity- Understand how elasticity effects the slope of the demand curve- Understand how elasticity changes along a linear demand curve- Understand the relationship between elasticity and Total