Exam 1 Review Sheet - Microeconomics | ECON 25100, Study notes of Microeconomics

Download Exam 1 Review Sheet - Microeconomics | ECON 25100 and more Study notes Microeconomics in PDF only on Docsity! ECON 251 Exam #1 Review Chapter 1 • Definition of economics • Scarcity • Opportunity cost • Sunk costs • Marginal costs and benefits Chapter 4 • Price elasticity of demand – Interpretation – Calculations – determinants • Elasticity and revenue – inelastic--revenue does what PRICE does – elastic--revenue does what QUANTITY does) • Other elasticities – Income elasticity (>0 is normal good, <0 is inferior good) – Cross-price elasticity (>0 are substitutes in consumption, <0 are complements in consumption) – Supply elasticity (>1 elastic, <1 inelastic) Chapter 5 • Allocative efficiency – Definition – MC = MB – sum of CS and PS is maximized • Deadweight loss • Symmetry principle • Utilitarianism (implications for MB of $$) • Maximin principle Chapter 6 • Price ceilings         Effective only if set below equilibrium         Result in shortages if effective (black market?)         DWL triangle to the left of equilibrium Price floors         Effective only if set above equilibrium         Result in surpluses if effective         DWL triangle to the left of equilibrium for minimum wage (to the right for agricultural price supports) Quotas         Effective only if set below equilibrium quantity         Prices rise to =MB Taxes         Result in DWL (transactions that add value are destroyed)         Consumer prices generally rise, but not by the entire amount of the tax         Whoever is LESS elastic bears more of the burden         DWL shrinks if either demand or supply becomes less elastic