Westhill Institute Vestigia Nulla Retrorsum Department of Curriculum and Academic Programs Subject: Economics Grade / Group: 1201/1202 Teacher s Name: Ana Isabel Almeida L. Semester Examination or Guide: Date: 23-05- 2011 Grade: 12 th Student Name By signing this document, I affirm that I have neither given nor received help with this guide. Student s Signature
Study Guide Economics Definitions 1. Economics, difference between microeconomics and macroeconomics 2. Scarcity and three questions in the economy 3. Difference between needs and wants. 4. Factors of production (land, capital, labor) 5. Circular Flow of Economic Activity 6. Economic interdependence 7. Change value and utility value 8. Productivity and economic growth 9. Trade off 10. Opportunity cost 11. Production Possibilities Frontier 12. Cost- benefit analysis 13. Marginal utility 14. Diminishing marginal utility 15. Demand 16. Market 17. Law of demand 18. Money price Relative price 19. Individual curve of demand 20. Market curve of demand 21. Change in the quantity demanded 22. Substitute goods 23. Complementary goods 24. Income- effect 25. Substitution effect 26. Change in demand (shift to the right left) 27. Determinants of demand Income, tastes and preferences, prices, future income, future products availability, population. 28. Elasticity, Unit elastic, Inelastic demand (example), Elastic demand 29. Determinants of demand elasticity 2 30. Total expenditure chart 31. Supply 32. Law of supply 33. Individuals and market supply curve 34. Change in quality supplied 35. Change in supply (shift) 36. Elasticity of supply 37. Determinants of elasticity supply 38. Equilibrium (supply and demand) 39. Price system 40. Competitive markets 41. Consumer Behavior Theory 42. Budget 43. Commodities Basket 44. Theory of Production 45. Production schedule 46. Cost analysis 47. Stages of production 48. Breaking point 49. Short run and long run 50. Diminishing return 51. Revenue and Profits 52. Economic Systems (Macroeconomics) 53. Market Economy 54. Perfect competition 55. Imperfect competition: monopoly, oligopoly 56. Measuring the Nation s output: GDP (two ways), GNP, NNP, NI, PI 57. Macroeconomics problems in the economy: Population and economic growth; unemployment, inflation, businesses fluctuation, poverty and income distribution 58. Role of Government, consumers and entrepreneurs.
59. Taxes, economic impact, criteria for effective taxes, main taxes 60. Government spending and budget 61. Deficit, surpluses and national debt 62. Financial system Multiple choice exercises: Analysis (Critical thinking) 63. Banking system and stock market 64. Macroeconomic equilibrium 65. Stabilization Policies 66. The Importance of Economic Development 1 The growth rate of real GDP is slowing down, but it is still positive. The economy is. 2 in an expansion at a business-cycle peak at a business-cycle trough in a recession In the country Zig, the population grows at 10 percent and real GDP grows at 10 percent. In the country of Zag, the population grows at 5 percent and real GDP grows at 10 percent. Average real GDP per person grows more quickly in Zig grows more quickly in Zag grows at the same rate in Zig and Zag in Zig and Zag cannot be compared by using these data 3 Unemployment is a problem for all the following reasons except. 4 human capital is lost the people who remain employed must learn new skills some people have little income production is lost On the planet of Argon, the price level was 100 in 1996, 125 in 1997, and 150 in 1998. Which of the following statements is true? 3
Argon's inflation rate has increased. Argon's price level has been steady. Argon's inflation rate has decreased. Argon's inflation rate has remained constant. 5 Sam borrows $50,000 from Sue, and he promises to repay the money in one year. During the year, inflation unexpectedly increases. The unpredicted inflation creates. an unexpected gain for Sam and an unexpected loss for Sue an unexpected loss for both Sam and Sue an unexpected gain for Sue and an unexpected loss for Sam an unexpected gain for both Sam and Sue 6 The challenges of macroeconomic policy include all the following except. a smaller government budget deficit a low inflation rate a job for everyone who wants one a positive economic growth rate 7 People enter the labor force. 8 as entrants or reentrants when their unemployment benefits run out by being hired or recalled when they switch from being unemployed to being employed Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially,. the economy remains at full employment there is a shortage of workers in both sectors 4
cyclical unemployment increases structural unemployment increases 9 Cyclical unemployment. grows at the same rate as potential GDP is zero at a business-cycle trough decreases during a recession increases during a recession 10 Full-time students are. counted as unemployed not in the labor force in the labor force counted as discouraged workers Problems Practice 1 st Case 1. Using a table to graph Supply and demand Equilibrium and answer the questions bellow. Annual supply and Demand for portable CD players Price Quantity demanded (thousands) Quantity Supply (thousands) 5 New Demand Curve $40 14 0 20 $42.50 12 1 18 $45 11 2 16 $47.50 9 3 13 $50 7 4 11 $52.50 5 5 9 $55 4 7 7 $57.50 3 9 5 $60 2 10 3 $62.50 1 12 2
a) How many CD players were in demand when the price was $47.50 b) Does this graph demonstrate the Law of Demand? Explain c) What would be the quantity supplied if the price increased from $42 to $62.50 d) In the table, does the movement in the demand curve from the old to the new represent a change in demand or a change in quantity demanded? Explain e) Which could be the cause of the movement shown in the graph for the new demand? 2. Explain how an understanding of elasticity can help business owners determine the most profitable prices to set for their products. 3. Explain the Income Effect and how it is related to the Law of Demand Second case: A friend of you owns a business. He doesn t understand how to analyses costs. He wants to know how many workers need to hire to optimize his profits. No. workers Total Product Mg Product FC VC TC MG C AFC AVC ATC REV PROF 0 0 2 10 5 22 8 34 11 58 13 86 17 98 19 108 21 116 Fixed C = 100 Salary = $70 $15 Price= 1. Fill the chart and graph all costs (3 graphs) 2. Explain with detail what means each column. 3. Where the business has a diminish marginal cost? Why? 4. Where and Why (how many workers and the quantity of products) this business is healthy and have good short run? 6
5. Decide the stages of production? Explain 6. If both families need to decide between clothes and entertainment. Create a chart showing their choices and graph their budget for each family. (budget line) I = clothes + entertainment Px = $150 average for each piece of clothes Py = $300 average to pay for a hotel each night. 3er Case Buget (consumer Behavior Theory) Income = $ 20000 Px = $200 average for buying food Py = $400 average to pay for clothes Family Options Qx Qy I A B C D E F a) Graph their budget b) Calculate their new budget if their income increase to $24000 4 th Case C = consumption I = Investment E= Imports X = exports G = Government Federal/ State/Local GDP Billions of dollars Years C I M X G GDP 1996 3708.7 816.4 362.2 526.1 1135.3 1997 3822.3 826.2 402.5 558.2 1166.2 1998 3972.7 830.1 465.8 580.2 1181.2 1999 4064.6 865.3 520.2 603.5 1214.1 2000 4132.2 816.2 564.4 626.3 1250.5 2001 4105.8 738.1 599.9 622.2 1258.1 2002 4219.8 790.8 639.4 669.5 1263.8 2003 4339.7 855.4 660.6 735 1260.5 2004 4471.1 979.9 715.1 823.3 1260.2 2005 4578.5 1011.5 888.9 774.8 1261.3 7
. 1. Compute GDP using historic expenditure approach (graph) 2. Calculate annual growth rate, from these calculations, an analysis decide how quickly or slowly the economy is growing (graph) 3. Calculate the percent distribution of GDP by expenditure components for each year. By doing this we can determine which sector is most important in determining GDP. 4. Determine the impact on GDP and the growth rates of a change in one or more of the expenditure components. If the investment decide to participated with 10% less. How much is the impact? 5. Calculate GDP per capita and GDP at current prices years GDP growth rate Population millions GDP per capita Inflation rate 1996 298.3 100.0 1997 298.5 103.4 1998 299.0 107.2 1999 299.3 110.1 2000 299.7 114.0 2001 300.3 118.9 2002 300.4 123.5 2003 300.9 127.8 2004 301.2 138.2 2005 301.8 141.3 GDP real prices 6. What does GDP per capita means? 7. How much income in average a person is receiving by month? 8. Use this data to make an analysis of this economy. 8