Bell Ringer
 Grab Your Clickers

 Demand increases
 (curve shifts right)
 When:
 Income
 P sub
 P comp
 # buyers
 Consumers expect P soon
 Affects buyer!!!
 Supply increases
 (curve shifts right)
 When profits
 When:
 Input costs
 Productivity
 Technology
 Business taxes


# sellers
Gov’t regulations
 Affects seller!!!

1.
Marginal cost of workers is
$276. How many workers should be hired?
 A) 11
 B) 12
 C) 13
 D) 14
 E) 15
# Workers Total Revenue
10 $1150
11 $1450
12 $1700
13 $1865
14 $1950
15 $1998

 A)
If the price of iPods
 B) goes down, how will this affect the supply and/or Q supplied of  C) iPods?
 D)

 A)
If the price of pepperoni goes up,
 B) how will this affect the supply and/or Q  C) supplied of pizza?
 D)

 A)
If corporate tax rates
 increase, how will
B) this affect the supply and/or Q supplied of
 products made by corp.’s?
C)
 D)

 A)
Two new companies start making flat screens. How will
 B) this affect the supply and/or Q supplied of flat
 C) screens?
 D)

 A)
An advance in insecticide technology allows for greater cotton
 B) yields. How will this
 affect the supply
C) and/or Q supplied of cotton?
 D)

I. Fundamental Concepts


Scarcity= unlimited wants but limited resources
4 Factors ( L L C E), 3 Q’s (What, How, For Who?)
 Opportunity Cost: next best alternative
 Specialization = doing 1 thing
 Division of Labor = break big job up into small jobs
 Buyer & seller both gain from voluntary exchange .
 Productivity-relationship of outputs to inputs
 Add more as long as MR>MC.

1) What is the opportunity cost of
90 guns?
 A) 90 butter C) 50 butter
 B) 50 guns D) 90 guns

2) Which point represents resources that are available but are not being used?
 A) A C) C
 B) B D) D

3) Which point represents a level of production currently unattainable?
 A) A C) C
 B) B D) D

4)

5)

Command
I. Fundamental Concepts -
Continued
Freedom Security Equity Growth Efficiency Price
Stability
Employment
Market
 _____]-------------------------------------------[________
 Brazil U.S. France China N.Korea

6) Which economic system is better at the economic goal of security?
 A) Traditional
 B) Command
 C) Mixed
 D) Market

7)

8)

II. Microeconomic Concepts

II. Microeconomic Concepts -
Continued

9) What do numbers 5 & 7 represent?
 A) Consumer Spending
 B) Goods & Services
 C) Income
 D) Land, Labor, Capital, Entrepreneurship

10) What do #’s 1 & 3 represent?
 A) Consumer Spending
 B) Goods & Services
 C) Income
 D) Land, Labor, Capital, Entrepreneurship

11) What do #’s 6 & 8 represent?
 A) Consumer Spending
 B) Goods & Services
 C) Income
 D) Land, Labor, Capital, Entrepreneurship

II. Microeconomic Concepts -
Continued
 Demand increases
 (curve shifts right)
 When:
 Income
 P sub
 P comp
 # buyers
 Consumers expect P soon
 Affects buyer!!!
 Supply increases
 (curve shifts right)
 When profits
 When:
 Input costs
 Productivity
 Technology
 Business taxes


# sellers
Gov’t regulations
 Affects sellerer!!!

II. Microeconomic Concepts -
Continued
 Roles of money: med.of exchange , store of value , unit of measure
 Supply & demand curves meet at equilibrium price & quantity
 Price floors cause surpluses
 Price ceilings cause shortages
 Elasticity is sensitivity to price changes
 Pet milk=elastic ;
Cigarettes=inelastic

12)

13) What is a surplus?
 A) when Q supplied > Q demanded
 B) when Q demanded > Q supplied

$3
14) What will result if the seller charges $2?
 A) A surplus, because
Qs will be > Qd.
 B) A shortage, because
Qs will be > Qd.
 C) A surplus, because
Qs will be < Qd.
 D) A shortage, because
Qs will be < Qd.

15) Which best describes a price floor?
 A) Maximum price, causes shortage
 B) Minimum price, causes surplus
 C) Maximum price, causes shortage
 D) Minimum price, causes surplus

16)

II. Microeconomic Concepts -
Continued
 Corporationlimited liability, double taxation
 Sole P. & Partnershipsunlimited (high) liability
 Monopoly1 seller
 OligopolyFew sellers, price leadership, interdependence
 PerfectMany , Identical, No barriers
 Monopolistic-Like perfect but product not identical

17)

18) It is easy to start a taxi-cab business, & there are a lot of them.
Some use nicer cars than others.
Some use hybrid cars. Fares vary somewhat between companies.
What kind of market structure best describes the taxi-cab business?
 A) monopoly
 B) oligopoly
 C) monopolistic competition
 D) perfect competition

III. Macroeconomic Concepts
 GDP= C + I + G +(X-M)
 (X-M) = Net Exports
 GDP: $ value of all final goods/ services
 CPI : measures INFLATION
 Stagflation: recession+inflation


Structural , Cyclical , Frictional, Seasonal
Biz Cycle: Recession ( 6 mo’s- peak to trough),
Expansion
 Debt : TOTAL owed
 Federal deficit : expenditures > receipts in 1 yr

19) If U.S. citizens buy more
Colombian coffee, & all other spending stays the same, then
GDP…
 A) goes up
 B) goes down
 C) stays the same

20) Which letter best represents a recession?
 A) W
 B) X
 C) Y
 D) Z

III. Macroeconomic Concepts -

Continued
Monetary policy : using $ supply & interest rates to help economy


Fed expands money supply with Bu.L.L.L.buying bonds (securities) , lower reserve req , lower discount rate , lower federal funds rate.
Fiscal policy : gov’t TAXING/SPENDING to help the economy
 Countries should specialize in making what they have a comparative advantage in, & trading.
 Tariff : tax on imports. Quota : limit on # of imports.

21) In an attempt to stimulate the economy, the government decides to spend more money on highway/road programs. This decision is a good example of:
 A) Easy monetary policy
 B) Tight monetary policy
 C) Fiscal Policy
 D) Contractionary Policy

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IV. International Economics
 Absolute Advantage: I can produce more with same amount of resources.
 Comparative Advantage: I can produce at a lower opportunity cost than you.
 When we specialize in what we have a comparative advantage in, and trade,
EVERYONE benefits.
 Exchange rates: strong dollar good for buyers of foreign goods, bad for U.S. sellers. A weak dollar means more exports & economic growth.

V. Personal Finance Economics
 Spread: interest charged minus interest paid
 Low risk = low return
 Bonds are LOANS
 Mutual funds: corporations that buy stock in other corporations
 Inflation HELPS borrower , HURTS lender
 Progressive : higher income, higher rate (income tax)
 Proportional : flat rate (Medicare)
 Regressive : lower income, higher rate (sales tax)
 Credit Rating- based mostly on payment history

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