Untitled

Study Guide Principles of Economics Economics 211 Chs. 1-4

Terms:

    1. scarcity

    2. opportunity cost

    3. positive economics

    4. normative economics

    5. rationality

    6. stocks

    7. flows

    8. quantity demanded

    9. demand

    10. quantity supplied

    11. supply

    12. normal goods

    13. inferior goods

    14. substitute goods

    15. complementary goods

    16. inputs

    17. substitutes in production

    18. by-products (complements in production)

    19. market equilibrium

    20. price ceiling

    21. price floor

    22. shortage

    23. surplus

    24. costs

    25. benefits

    26. marginal benefits

    27. marginal costs

    28. total revenues

    29. marginal revenues

    30. sunk costs

    31. transactions costs

    32. price elasticity of demand

Study Questions:
  1. Why does scarcity imply costs? competition?

  2. What are the factors that affect quantity demanded and in what way (direction, positive or negative) do they tend to affect quantity demanded, ceteris paribus (other things being equal)?

  3. What are the factors that affect quantity supplied and in what way (direction, positive or negative) do they tend to affect quantity supplied, ceteris paribus (other things being equal)?

  4. Why is price inversely related to quantity demanded and positively related to quantity supplied?

  5. What are the factors that affect the price elasticity of demand, and how do they affect price elasticity of demand?
  6. How is elasticity of demand related to the marginal revenues of sellers? How are price increases and decreases related to revenue increases and decreases when demand is elastic? when it is inelastic? when it is unit elastic? See Note 6 from the Course Notes on elasticity, especially see Table 3.
  7. Why do markets tend to move price and quantity traded toward equilibrium? What are some of the undesirable effects of price controls?

  8. How is the behavior of many diverse people coordinated by market processes? Be able to work with supply and demand diagrams.

  9. Why does a drafted military cost society more and the taxpayers less than an "all volunteer" military? Why is the "tax burden" distributed less fairly with a draft?

  10. Why do marginal costs of an activity tend to rise as we increase the amount of that activity?
  11. Why do marginal benefits of an activity tend to fall as we increase the amount of that activity?
  12. Explain why net gains (benefits minus costs) are maximized where marginal benefits are equal to marginal costs?
  13. Why are "sunk costs" not really costs?

Be sure to look at the vast resources availabe at the Heyne book's web site.

Also, take a look at all of the questions at the end of the chapters in Heyne. Background Gif by Barbara Durham

Animated Gifs by Expert Software 

                                                              

       PREVIOUS PAGE                              HOME                               NEXT PAGE