$1)$ Be able to define and explain the difference between scarcity and poverty. $2)$ What is scarcity? What does it imply? $3)$ How do markets ration? How does rationing occur in central planning or political organization? a$.$ How does competition show itself in each system? $4)$ Know the eight emphasized points. $5)$ What is positive economics? What is normative economics? Be able to distinguish between examples of each. Chapter $21)$ Why is trade good? Who benefits from trade? $2)$ What are transaction costs and how are they reduced? a$.$ What do middlemen $($or middle$-$people$)$ do in relation to transaction costs? $3)$ Why are property rights important? What incentives do they create? $4)$ What is the PPC$?$ What does it tell us$?$ a$.$ Be able to illustrate its use with two goods and for investment and consumption. b$.$ Know how to work the numerical examples from the homework. c$.$ Why does the PPC shift? $5)$ Be able to explain comparative advantage and identify it between two parties $($as in the Italia and Nire problem$)$ and explain it as in the homework problems and the appendix. a$.$ Be able to create a mutually beneficial trade. b$.$ Know how this improves the country$$s ability to produce the two goods relative to their own PPC$.$ Chapter $31)$ Be able to draw a demand curve and supply curve, and identify consumer surplus and producer surplus. $2)$ Know the difference between increases in the quantity demand or supplied $($movement along the curve$)$ and a change in demand or supply $($a shift in the curve$).$ a$.$ What causes a shift in demand? b$.$ What causes a shift in supply? $3)$ Be able to identify and explain the difference between inelastic and elastic demand or supply. a$.$ What can increase elasticity of demand? $4)$ Know the difference between accounting cost and economic costs $($include the idea of opportunity cost$).5)$ Identify equilibrium, excess supply and excess demand $($a shortage$).$ At equilibrium, what is true about the consumer$$s evaluation of the marginal unit and the marginal cost to produce that unit? $6)$ What is economic efficiency? $7)$ What is the $$invisible hand$,$ the role of prices and profits? Chapter $41)$ Know how a change in a product market causes a change in a resource market. $2)$ What is a price ceiling and a price floor? a$.$ What are their effects? b$.$ What do they do to quantity and to consumer and producer surplus? c$.$ Know the examples discussed in class. $3)$ Know what a black market is and its characteristics. Chapter $51)$ What are the two major functions of government? $2)$ How does perfection look in light of cost$/$benefit analysis? $3)$ How might the invisible hand fail and how can government help in each case? Be able to graph these. a$.$ What are external benefits and external costs? How do they affect the quantity supplied? b$.$ What does a lack of competition do to the market for a product? How can the government limit this problem? c$.$ What qualities must something have to be a public good? Be able to distinguish between public goods and goods that are not public goods. d$.$ What issues does poor information cause and how might these issues be resolved?