ECON 308: Topical Review for First Midterm Spring 2011 ( Ch 1-4, 6,7)
The following is a review of the topics we have covered and should serve as a review tool. The list may not be definitive.
1. Introduction to Economic Theory
A. Defined Economics
B. Positive vs. Normative analysis
C. Derived the Elements in the construction of Theory
D. Defined Marginal Analysis
2. Basis of Economics
A. Defined Goods, Scarce (Economic) Goods, Free Goods, Resources (Categories of)
B. Defined Basic assumptions of Scarcity
C. Derived Implications of Scarcity [Choice, Cost, Competition]
D. Defined Economic (Opportunity) Cost, Explicit, Implicit, Sunk
E. Compared economic costs; accounting costs
F. Derived the Forms of Competition
G. Evaluated Forms of Competition re: Goals of a Rationing system
H. Derived Implication: Life is Not Fair !
3. Introduced the Market System of Competition.
A. Circular Flow diagram
B. Defined Flow variables
C. Defined Ceteris Paribus
D. Assumptions of economic Agents
E. Defined Markets
F. Determinants of relevant geographic market
4. Derived and defined Demand
A. Derived the first Law of Demand
B. Analyzed two ways to read the function; (MV or Qd)
C. From a demand curve example, derived, defined and calculated
D. Marginal value; total personal value; consumer surplus value; Exchange Value =
Total revenue.
E. Derived the four determinants of individual demand
F. Analyzed how changes in each determinant shifts demand
G. Derived market demand
5. Market Analysis:
A. Derived and defined market Supply
B. Analyzed two ways to read supply function: MC or Qs)
C. Derived the determinants and shift factors of supply
D. Defined Equilibrium, shortage, surplus
E. Analyzed the reasons markets adjust to equilibrium.
F. Dynamic analysis: analyzed how changes in demand and supply change prices and
quantity exchanged. (Noted how differing elasticity’s affect relative change in price
and quantity.)
6. Demand Attributes and Characteristics: (Ch. 4)
A. Calculation of price elasticity: Price elasticity of demand, price elasticity of supply.
B. Defined elastic, unitary elastic, inelastic.
C. Variation of elasticity on a straight line demand curve.
D. Relationship of elasticity to marginal revenue, and effects of price change on TR.
E. Determinants of Price elasticity of demand.
F. Second law of demand, reasons
G. Income elasticity of demand, Cross-Price elasticity of demand.
H. Product Attributes
I. Product Life-Cycle
J. Demand Estimation
7. Analysis of Market Structure (Ch 6)
A. Transaction Costs of Exchange (Classnotes)
B. Analyzed alternative market structures according to different demand elasticity
C. Degree of Competition and Market Power
D. Derived the assumptions of the Price Taker model of competition
E. Derived the firm demand curve and how P = MR
F. Derived the profit maximizing rule of output
G. Analyzed profit potential and derived the short run supply curve of the firm and
industry.
H. Derived the shift factors of industry supply
I. Defined long run industry equilibrium
J. Analyzed the short run and long run adjustments to changes in industry demand
K. Derived the role of economic profits in the short run and the long run
L. Sources of Market Power: Barriers to Entry
M. Alternative Market Structures:
1. Perfect Competition = Price Taker (Above)
2. Monopoly (Brief Description)
3. Oligopoly (Brief Description)
4. Monopolistic Competition (Brief Description)
8. Monopoly Pricing (Chapter 7, Classnotes & Powerpoints)
A. Determinants of elasticity of Demand
B. Defined first, second and third degree price discrimination
C. Derived the necessary conditions for successful price discrimination
D. Analyzed examples of each
E. Analyzed output effects and efficiency implications of P.D.
F. Analyzed two-part tariffs