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Review of Chapters 1 – 3 and 5

Chapter Review. Review of Chapters 1 – 3 and 5. Chapter Review. CHAPTER 1: Economic Perspective (scarcity & choice, purposeful behavior, marginal analysis): P4-5 Theories, Principles and Models (scientific method, generalization, other-things-being-equal): P5-6

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Review of Chapters 1 – 3 and 5

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  1. Chapter Review Review of Chapters 1 – 3 and 5

  2. Chapter Review CHAPTER 1: Economic Perspective (scarcity & choice, purposeful behavior, marginal analysis): P4-5 Theories, Principles and Models (scientific method, generalization, other-things-being-equal): P5-6 Macroeconomics & Microeconomics (to include positive & normative economics): P6-7 Individual’s Economizing Problem: P7-10 limited income unlimited wants budget lines attainable/unattainable combinations trade-offs/opportunity costs choice income changes

  3. Chapter Review CHAPTER 1: Society’s Economizing Problem: P10-11 Scarce resources Resource categories) Production Possibilities Model : P11-14 PP table PP curve Economic curve Optimal allocation – MB=MC Unemployment, Growth and the Future: P14-18 Growing economy – increases in resource supplies & advances in technology, Present choices/future possibilities

  4. Chapter Review CHAPTER 2: Economic Systems (command & market system): P30 Characteristics of the Market System : P30-34 Private property Freedom of enterprise & choice Self-interest Competition Market & prices Technology & capital goods, Specialization Use of money Active but limited gov’t

  5. Chapter Review CHAPTER 2: Five Fundamental Questions: P34-37 The Invisible Hand: P38 Demise of the Command System (coordination & incentive problem): P38-40 Circular Flow Model: P40-41

  6. Chapter Review CHAPTER 3: Markets: P48 Demand: P48-53 Law of Demand (inverse relationship between price & quantity) Demand Curve Determinants Changes in Demand (tastes, number of buyers, income – normal goods, prices of related goods – substitute good/complementary good/unrelated goods, consumer expectations) Changes in Quantity Demanded

  7. Chapter Review CHAPTER 3: Supply: P53-56 Law of Supply (direct relationship between price & quantity) Supply Curve Determinants (resource prices, technology, taxes/subsidies, price of other goods, producer expectations, number of sellers) Changes in Quantity Supplied

  8. Chapter Review CHAPTER 3: Market Equilibrium: P56-60 Rationing of Prices Efficient Allocation Changes in Supply, Demand & Equilibrium Government Set Prices (price ceiling & price floor): P61-64

  9. Chapter Review CHAPTER 5: Market Failures in Competitive Markets: P93 Demand side market failure Supply-side market failures Efficiently Functioning Markets: P93-99 Consumer Surplus Producer Surplus Efficiency Revisited Efficiency Losses (or Deadweight Losses)

  10. Chapter Review CHAPTER 5: Public Goods: P99 - 104 Private goods: Rivalry & Excludability Public goods: Nonrivalry & Nonexcludability Optimal Quantity of a Public Good Demand for Public Good Comparing MB & MC Cost-Benefit Analysis Quasi-Public Goods Reallocation Process

  11. Chapter Review Externalities: P104 - 109 Negative Externalities Positive Externalities Government Intervention Direct Controls Specific Taxes Subsidies & Government Provision Society’s Optimal Amount of Externality Reduction Government’s Role in the Economy: P109 - 110

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