Microeconomics MSE Study Guide for 2019 PDF

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Microeconomics MSE Study Guide for 2019 this is a full study guide for exam study and mid semester...

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ECF1100 Mid-Semester Exam Study Guide This study guide covers the material, i.e. what to study. I will release a file which covers all the rules and regulations once I have received confirmation from the Faculty. Just a few basic details: Date: Monday 11 May Start Time: 9am Finish Time: 10:10am Writing time: 70 minutes Format: 20 multiple choice questions Topics: chapters 1-4 Worth: 30% The exam will be delivered online and will be accessible via your ECF1100 Moodle site. You will need to use an electronic device and ensure you have a reliable internet connection for this assessment. The ECF1100 mid-semester exam is open book. The Department of Economics has decided that Economics units will not be remotely invigilated by Examity or any other provider (no cameras watching you). An open book exam means all students have the same level playing field. The students who prepare properly for the exam will do better. You are permitted to use a HP 10bII+ calculator and/or a Casio fx82 calculator.

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What’s the best way to prepare for the exam? 1. Watch the lecture recording and animated PPT slide show for each chapter. 2. Redo the Questions for Review, Problem Sets and Tasks for each chapter (the answer keys are on Moodle). 3. Watch the Problem Set videos for each chapter (“Extra Stuff” block). 4. Watch the Key Concepts videos (“Extra Stuff” block). 5. Fill out the Worksheets (“Extra Stuff” block). 6. Redo the InQuizitive quizzes in review mode. 7. Attempt the Sample Exam (“Mid Semester” block). Available 27 April. 8. Log in to the Zoom office hours if you need help (I will provide some extra hours in the week preceding the mid-semester exam). 9. Take the Practice Exam on Moodle. Available 4 May.

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Chapter 1: The Nature of Economics Concept of scarcity: general phenomena in Economics, not just a shortage (layman’s definition). Limited resources v unlimited wants. Importance of incentives: positive/negative. Direct incentives (primary behavior). Indirect incentives (secondary behavior) – often called unintended consequences. Why do we face trade-offs? How does this relate to opportunity cost? Marginal thinking: MB v MC. Trade is a positive sum game: both parties benefit. Trade creates value experiment.

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Chapter 2: Scarcity & the World of Trade-Offs How is economics similar to, and different from, “hard sciences”? Understand the difference between positive (what is) & normative (what should be) analysis. Economic models: endogenous factors (factors within model you build), ceteris paribus (change 1 factor within model), exogenous factors (not included in model). PPF: you should be able to draw a PPF & distinguish between a linear (constant opp. cost) & concave slope (rising opp. cost) & identify points which are inefficient, efficient & unobtainable. What causes the PPF to shift? A PPF shift could affect the production of 1 good or both goods. Specialisation & trade: what are the benefits to society? You should be able to work out absolute & comparative advantage & calculate opportunity cost from a table: 2 individuals; 2 goods. How does opportunity cost relate to comparative advantage? Terms of trade must lie between both parties’ opportunity cost. Illustrate gains from trade: we can move beyond our current PPF. Consumer goods v capital goods tradeoff: illustrate on a PPF.

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Chapter 3: Demand & Supply Law of Demand: what’s your price experiment. Difference between a shift in the demand curve v a movement along the demand curve. Factors which affect demand: cause it to shift. Law of Supply: karaoke experiment. Difference between a shift in the supply curve v a movement along the supply curve. Factors which affect supply: cause it to shift. Equilibrium: calculate using algebra & illustrate. What happens when there is a shortage/surplus? How does the market move back towards equilibrium? Solve for equilibrium price/quantity using algebra. Shifts in demand/supply: be able to illustrate this.

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Chapter 4: Elasticity Determinants of price elasticity of demand: (1) substitutes; (2) share of budget; (3) necessity v luxury; (4) market broadly or narrowly defined; (5) time. Basic formula to calculate elasticity of demand:

Use this formula when you are given a % Δ in Qd & price.

Midpoint method to calculate elasticity of demand:

Use this formula when you are given 2 prices & 2 levels of Qd.

Categories Perfectly inelastic: Ed = 0 (no Δ in Qd when price changes) – vertical line. Inelastic: 0 > Ed > -1 (Δ in Qd < Δ in price) – steep line. Unit Elastic: Ed = -1 (Δ in Qd = Δ in price). Elastic: - 1 > Ed > - infinity (Δ in Qd > Δ in price) – flat line. Perfectly Elastic: Ed = - infinity (infinite demand at 1 price) – horizontal line. You should be able to identify which category certain goods belong to based on information in the question.

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Slope & Elasticity Slope is constant along a linear demand curve; elasticity is not. Elasticity rises as we move up along the demand curve (price rises, more willing to substitute away). Elasticity falls as we move down along the demand curve (Qd is less responsive).

Elasticity & Total Revenue Inelastic: 0 > Ed > -1. Price falls, TR falls; price rises, TR rises. Unit Elastic: Ed = -1. No change in TR. Elastic: - 1 > Ed > - infinity. Price falls, TR rises (Boxing Day sales); prices rises, TR falls.

Elasticity of Supply: determinants, formula, meaning.

Cross-Price elasticity: determinants, formula, meaning.

Income Elasticity: determinants, formula, meaning.

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