ECON 221 1st EditionExam # 1 Study Guide Lectures: 1 - 5Lecture 1 (August 26)- Big Ideas:o Incentives Matter Incentives: rewards and penalties that motivate behavioro Good institutions align self-interest when they respond to incentives aligns self-interest with social interest Market economies have proven to be more successful compared to centrally planned economies Information gaps, externalities Taxes, rent controlo Trade-Offs are Everywhere Trade-offs: if you’re doing something, you’re giving up/not able to do something else Opportunity cost: what you give up to obtain somethingo Thinking on the Margin Whether to do something or not/which thing to do? Marginal Changes: incremental adjustments to an existing plan Marginal Costs and Marginal Benefits (Revenue)Lecture 2 (August 28)- Big Ideas:o The Importance of Wealth and Economic Growth Wealth matters, but what determines economic growth?- Productivity or the quantity of goods and services produced from each unit of labor input- Public policies to boost productivityo Institutions Matter People respond to incentives when markets exist- Property rights ensure that markets function properly- Market economies need institutions to enforce property rights so individuals can own and control scarce resourceso Final Big Ideas Macroeconomic lessons: Appropriate Monetary and Fiscal Policies can smooth out normal booms and busts of the macro economy- Can make recessions shorter and less deep Inflation occurs when the government prints too much money Central Banking is a hard job Economics is fun, pays a lot!Lecture 3 (September 2)Chapter 3: Supply and Demand- Markets and Competitiono Market: group of buyers and sellers of a particular good or serviceo Buyers Determine the demand for the producto Sellers Determine the supply of the product- Demando A demand curve is a function that shows the quantity demanded at different priceso Quantity demanded: the quantity of a good that buyers are willing and able to buy at a particular priceo Law of Demand: Other things equal, when the price of a good rises, the quantity demanded of that good falls, and when the price of a good falls, its quantity demanded rises- Individual Demando Demand Schedule: a table that shows the relationship between the price of a good and its quantity demanded- Shifts in the Demand Curveo 5 reasons Income— Normal good and Inferior good Population Price of Substitutes Price of Complements Expectations TastesLecture 4 (September 4)Chapter 3: Supply and Demand (cont.)- Supplyo Supply Curve: A function that shows the quantity supplied at different priceso Quantity supplied: the amount of any good or service that sellers are willing and able to sell at a particular priceo Law of Supply: Other things equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well- Supply Scheduleo Supply schedule: a table that shows the relationship between the price of a good and quantity supplied, keeping everything else constant- Shifts in the Supply Curveo Supply Shifters Technological Innovations and Changes in the Price of Inputs Taxes and Subsidies Expectations Entry or Exit of Producers Changes in Opportunity CostsLecture 5 (September 9)Chapter 4: How Supply and Demand Determine Prices- Supply and Demand Togethero Equilibrium: A situation in which the market price has reached the level at which quantity supplied equals quantity demandedo Equilibrium price: the price that balances quantity supplied and quantity demandedo Equilibrium quantity: the quantity supplied and the quantity demanded at the equilibrium