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.