ECON 102 EXAM 1 STUDY GUIDE General Information about the Exam Exam 1 is scheduled for Monday September 27 2021 The exam will be administered in our regular classroom during regular class time The exam will cover chapters 1 2 3 and 4 The exam will comprise o 20 multiple choice questions worth 100 points o 3 short answer questions 100 points Duration of test regular class session 50 minutes What you need to bring to the test A pencil and eraser A basic calculator must be nonprogrammable I ll give you a scantron for the multiple choice questions What you cannot use on the test Books Notes etc Internet sources Recommendations for studying for the exam Read the textbook chapters at least once the relevant pages are listed on the course outline in the syllabus Read the course packet material and your class notes for the chapters on the exam Work through ALL the review questions for the relevant chapters Use my office hours if you still have trouble with any of the course content 1 ECON 102 EXAM 1 STUDY GUIDE Review your quizzes and homework assignment STUDY GUIDE Chapter 1 The Nature of Economics Defining economics o Understand the concept of scarcity o Understand the need to make choices as a consequence of scarce resources o Understand the meaning of resources in economics Types of resources aka factors of production o Land o Labor o Physical capital o Human capital o What to produce o How to produce o For whom to produce Know the fundamental economic problems or questions Know the meaning of an economic system and how it relates to answering the fundamental economic questions listed above o Understand the key differences between a command and control economic system and a market price system 2 ECON 102 EXAM 1 STUDY GUIDE Understand the meaning of marginal analysis aka marginalism or thinking at the margin o Understand and be able to identify marginal cost o Understand and be able to identify marginal benefit o Understand and be able to identify sunk cost o Understand the role of incentives in altering costs and benefits of specific actions The scope of economics o Macroeconomics versus microeconomics o Positive economics versus normative economics Chapter 2 Scarcity and the World of Trade offs Understand the meaning of trade offs Understand the meaning of opportunity cost and how it differs from trade offs Understand the simple production possibilities model o Be able to draw a simple production possibilities curve for a given set o Understand how to calculate opportunity cost from a given set of o Understand the difference between constant opportunity cost and of production possibilities production possibilities increasing opportunity cost o Understand the reason why increasing opportunity cost occurs o Understand the meaning of productive efficiency and how it s illustrated on the PPC 3 ECON 102 EXAM 1 STUDY GUIDE Shifts in the PPC o Understand the concept of long run economic growth o Understand how economic growth is illustrated on the PPC o Understand the primary causes of long run economic growth shifts in the PPC i e changes in resources and technology Specialization and trade o Understand the value of specialization and trade o Understand the concept of gains from trade o Understand the concepts of absolute advantage and comparative o Be able to determine the country or individual with a comparative advantage in the production of a goods from a set of production possibilities see comparative advantage absolute advantage questions on advantage Homework 1 Chapter 3 Demand and Supply Define demand o Know the difference between demand and quantity demanded o Understand the law of demand o Be able to construct a demand curve from a set of prices and quantities o Understand how you go from individual demand to market demand horizontal summation of individual demand curves o Understand the shift factors in demand i e factors that cause a change in demanded demand o Be clear about the difference between a change in demand and a change in quantity demanded 4 ECON 102 EXAM 1 STUDY GUIDE Define supply o Know the difference between supply and quantity supplied o Understand the law of supply o Be able to construct a supply curve from a set of prices and quantities o Understand how you go from individual supply to market supply horizontal summation of individual supply curves o Understand the shift factors in supply i e factors that cause a change in supplied supply o Be clear about the difference between a change in supply and a change in quantity supplied Putting demand and supply together o Understand the concept of market equilibrium equilibrium price and equilibrium quantity o Be able to identify and calculate the amount of surplus or shortage when the price is higher or lower than the market equilibrium price o Know how to solve for the market equilibrium price and quantity from simple linear demand and supply equations o You should also be able to draw the demand supply curves represented by a set of linear equations and indicate the equilibrium price and quantity on the graph 5 ECON 102 EXAM 1 STUDY GUIDE Chapter 4 Extensions of Demand and Supply Shifts in demand and supply aka demand and supply shocks o Understand the effects on equilibrium price and quantity of changes in demand aka demand shocks while supply is unchanged o Understand the effects on equilibrium price and quantity of changes in supply aka supply shocks while demand is unchanged o Understand the effects on equilibrium price and quantity of simultaneous changes shifts in demand and supply Price controls o Price ceiling legal maximum price only effective if set below the A price ceiling set below the market equilibrium price creates a o Price floors legal minimum price only effective if set about the market A price floor set above the market equilibrium price creates a market price shortage price surplus 6