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.