Microeconomics Exam 1 Study guide Chapter 1: The Big Ideas Big ideas #1-5 Incentive Tradeoff Private property rights Opportunity cost Invisible hand Chapter 3: Supply and Demand Market Market Demand/demand schedule Quantity demanded Willingness to pay Marginal benefit Law of Demand "value" and the demand curve Sum of Each Individual Consumer's Demand = Market Demand Consumer surplus* Demand shifts Market Supply/supply schedule Quantity supplied Willingness to sell Marginal cost Law of Supply Sum of Each Individual Producer's Demand = Market Supply Producer surplus* Supply shifts

Chapter 4: Equilibrium Equilibrium Surplus* Shortage* Unexploited gains from trade* Wasted resources* New equilibrium given a supply or demand shift (show change to S or D, and Qs or Qd)

Chapter 5: Elasticity and its applications Elasticity of demand* Inelastic vs elastic demand Unit elastic

Characteristics of inelastic and elastically demanded goods, slope Total revenue rules of demand Total revenue* (sales) = Price*Quantity Second law of demand Elasticity of supply* Inelastic vs elastic supply Characteristics of inelastic and elastically supplied goods, slope

Chapter 8: Price ceilings and price floors Price control Price ceiling (binding vs nonbinding) Price floor (binding vs nonbinding) Black markets Effects of a price ceiling, show and calculate deadweight loss (lost consumer and producer surplus), value of wasted time* Rent control Alternative policies to rent control Effects of a price floor, show and calculate deadweight loss, quality waste* Minimum wage Alternative policies to the minimum wage *means requires calculation