Econ Semester Final Exam
Chapter 1: What is Economics?
Key Concepts:
- Capital Goods: Manufactured goods needed to produce other goods and services.
- Economic Interdependence: Actions in one part of the world impact economies elsewhere.
- Paradox of Value: The contradiction where necessities have little value, but non-necessities have high value.
- Division of Labor: Specialization in specific tasks for efficiency, commonly seen in assembly line production.
Chapter 2: Economic Systems and Decision Making
Key Concepts:
- Command Economy: Government makes major economic decisions.
- Market Economy: Consumer choices drive production; the USA is an example.
- Economic Goals: Efficiency, growth, equity, and stability.
- Voluntary Exchange: Free market transactions benefit both buyer and seller.
Chapter 3: Business Organizations
Key Concepts:
- Partnerships: Legal arrangements where partners share or limit liabilities.
- Corporations: Separate legal entities with limited liability.
- Nonprofits: Provide services without profit motives, e.g., Chambers of Commerce.
- Mergers: Horizontal (same product), Vertical (different production steps)
Chapter 4: Demand
Key Concepts:
- Law of Demand: Lower prices lead to higher demand.
- Substitutes and Complements: Products can replace or enhance each other.
- Elasticity: Sensitivity of demand to price changes.
Chapter 5: Supply
Key Concepts:
- Law of Supply: Higher prices lead to higher quantities supplied.
- Supply Curve: Typically upward sloping.
- Factors Affecting Supply: Inputs, productivity, taxes, and regulations.
Chapter 6: Prices and Decision Making
Key Concepts:
- Market Equilibrium: Balance of supply and demand.
- Surplus and Shortage: Price adjustments address mismatches.
- Competitive Pricing: Ensures optimal resource allocation.
Chapter 9: Taxation
Key Concepts:
- Effective Taxes: Must be equitable, simple, and efficient.
- Tax Principles: Benefit and ability-to-pay principles.
- Tax Loopholes: Exceptions in laws that allow tax avoidance.
Chapter 12: Savings and Investments
Key Concepts:
- Capital Formation: Driven by savings and investments.
- Financial Intermediaries: Bridge savers and borrowers.
- Bond: Have components like coupon, maturity, and par value.
- Markets: Capital (long-term) vs. money (short-term).
Building Wealth
Key Steps:
1. Build an emergency fund
2. Avoid debt (e.g., credit cards).
Practice Questions:
69. Step one is to build your emergency fund
70. Avoiding credit cards aligns with staying debt-free