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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

Chapter Review

Review of Chapters

1 – 3 and 5

slide2

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

slide3

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

slide4

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

slide5

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

slide6

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

slide7

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

slide8

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

slide9

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)

slide10

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

slide11

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