Test#1 Study Guide

Note: The test will consist of 30 True/False and/or Multiple Choice questions (worth 60 points), and a graphical analysis section (worth 40 points).

The following are a list of topics to study for the True/False and/or Multiple Choice questions. (worth 60 points) 

  • Opportunity cost.
  • Examples of economic resources.
  • Macro vs. Micro economics.
  • Positive vs. Normative economics.
  • Recessions vs. Expansions.
  • Inflation vs. deflation.
  • Price stability.
  • Absolute vs. comparative advantage.
  • A competitive market. 
  • Law of demand.
  • Movement along the demand curve.
  • Factors that cause the demand curve to shift.
  • Normal vs. inferior goods.
  • Substitute vs. Complement goods. 
  • An increase vs. a decrease in the demand curve. 
  • An increase vs. a decrease in the supply curve. 
  • 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.
  • Know what an input is. 
  • Price ceiling vs. price floor.
  • The market-clearing price.
  • A shortage vs. a surplus of goods. 
  • A price control.

The following are a list of topics to study for the graphical analysis section (worth 40 points). 

  • Illustrating an increase or decrease in price. (Refer to the Law of Demand and the Law of Supply to know how quantity will respond in either case) 
  • Illustrating an increase or decrease in supply when demand remains the same. 
  • Illustrating either an increase or decrease in supply and an increase or decrease in demand. 
  • Illustrating a price ceiling or a price floor given data.