Summary
Summary Microeconomics Chapter 1-5 Review Sheet
- Course
- Econ 102
- Institution
- Queens College
Chapter 1-5 Review Sheet for Econ 102. *Essential!! *For you, at a price that's fair enough!!
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Chapter 1What’s economic?
Scarcity- The resources we use to produce goods and services are limited.
Economics- The study of choices when there is scarcity.
Factors of Production- The resources used to produce goods and services; also known as
production inputs, or resources.
o Natural Resources- Resources provided by nature and used to produce goods
and services.
Ex: fertile land, mineral deposits, water
o Labor- Human effort, including both physical and mental effort people, used to
produce goods and services.
o Physical Capital- The stock of equipment, machines, structures, and
infrastructure that is used to produce goods and services.
Ex: forklifts, computers, factories, airports
o Human Capital- The knowledge and skills acquired by a worker through
education and experience and used to produce goods and services.
Ex: Surgeon needs learn anatomy and acquire surgical skills
o Entrepreneurship- The effort used to coordinate the factors of production—
natural resources, labor, physical capital, and human capital—to produce and sell
products.
Ex: Bill Gates of Microsoft and Steve Jobs of Apple
Money is not a part of factors of productions.
Positive Analysis- Answers the question “What is?” or “What will be?” (more factual and
predictable)
Normative Analysis- Answers the question “What ought to be?” (more opinion based)
(SEE TABLE 1.1)
Queens College- state funding, donation (Madoff, biggest donation)
Supply and Demand- two variables, only cares about these twos
Scarcity doesn’t expand economic growth. Some examples include: better production
facilities, better educational opportunities, new and better technology, and better public
infrastructure.
A change in a variable measured on an axis of a graph causes a movement along the
curve, while a change in a relevant variable that is not measured on an axis causes a
shift in the curve.
Economic Model- A simplified representation of an economic environment, often
employing a graph.
Variable- A measure of something that can take on different values.
ceteris paribus- A Latin expression meaning that other variables are held fixed.
, marginal change- A small, one-unit change in value (opportunity cost). How will a small
change in one variable affect another variable and what impact that has on people’s
decision making.
Macroeconomics- The study of the nation’s economy as a whole; focuses on the issues
of inflation, unemployment, and economic growth.
o Macroeconomics explains why economies grow and change and why economic
growth is sometimes interrupted.
o Macroeconomics explains why resources increase over time and the
consequences for our standard of living.
Microeconomics- The study of the choices made by households, firms, and government
and how these choices affect the markets for goods and services.
o One reason for studying microeconomics is to better understand how markets
work and to predict how various events affect the prices and quantities of
products in markets.
Economists may differ in their conclusions from positive analysis.
Adam Smith suggested that people act in their own self-interest. Self- interest is more
powerful thank kindness or altruism.
People are not motivated exclusively by self-interest.
Positive Relationship- A relationship in which two variables move in the same direction.
Negative Relationship- A relationship in which two variables move in opposite
directions.
Slope of a Curve- The vertical difference between two points (the rise) divided by the
horizontal difference (the run).
Chapter 2
Opportunity Cost- What you sacrifice to get something.
The Principle of Opportunity Cost- The opportunity cost of something is what you
sacrifice to get it.
Production Possibilities Curve- A curve that shows the possible combinations of
products that an economy can produce, given that its productive resources are fully
employed and efficiently used. (SEE FIGURE 2.1 & 2.2)
The Marginal Principle- Increase the level of an activity as long as its marginal benefit
exceeds its marginal cost. Choose the level at which the marginal benefit equals the
marginal cost. (SEE FIGURE 2.3)
Marginal Benefit- The additional benefit resulting from a small increase in some activity.
Marginal Cost- The additional cost resulting from a small increase in some activity.
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