Test#1 Study Guide

Note: The test will consist of 20 True/False questions (worth 60 points), and a graphical analysis section (worth 40 points).

The following are a list of topics to study for the True and False questions. 

• Opportunity cost.
• Macro vs. Micro economics.
• Positive vs. Normative economics.
• Recessions.
• Inflation vs. deflation.
• Price stability.
• Absolute vs. comparative advantage.
• Competitive market.
• Law of demand.
• Movement along the demand curve.
• Factors that cause the demand curve to shift.
• Normal vs. inferior goods.
• Market equilibrium.
• Law of supply.
• Factors that cause the supply curve to shift.
• Know what happens to equilibrium Price and Quantity when there is an increase in demand.
• Know what happens to equilibrium Price and Quantity when there is a decrease in supply.
• Know what happens to equilibrium Price and Quantity when there are simultaneous shifts in supply and demand.
• Price ceiling vs. price floor.

The following are a list of topics to study for the graphical analysis section. 

• Illustrating an increase in price. 
• Illustrating an increase in demand when supply remains the same. 
• Illustrating an increase in demand and a decrease in supply.