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Final Exam Study Notes Intro to Microeconomics (ECON 201)
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ECON 201 FinalsChapter #1
Challenges in today’s Society:
● Unemployment rates among the young
● Government depts
● Inequality on the rise
The good in today’s society:
● Lower child mortality
● Property on the rise
● Higher life expectancy
Definitions:
● Macroeconomics: Economy among sectors (national)
● Microeconomics: Individual behaviour in the context of scarcity
● Economics: Methods and ideas for improvement of society
● Mixed economy: Goods and services offered by private and public(gov)
● Model: Formalisation of facilitated theory
● Theory: Logical view of how things work
● Opportunity: Choice that must be sacrificed when the choice is made (time)
● Production Possibility frontiers (PPF): Allocating productive time efficiently
● Absolute advantage productions: Productivity at full capacity
● Zero-sum game: One gain the other loses
● Recession: output falls below the economy’s capacity output
● Boom: High growth, raise output levels above normal capacity outputs
● Scarcity: Rareness, shortage
Markets (central of economic lives) allows to:
1. Trade
2. Work efficiently
3. Improve living standards
,Trade examples:
● NAFTA (North American free trade agreement) Canda, USA, Mexico
● CETA (COmprehensive economic and trade agreement) Canada & EU
● TPP (Transpacific Partnership) 12 pacific rim economies
The productivity of labour:
● Skills, knowledge & experience (Higher value output)
● Capital stock (Buildings, machinery, equipment, software)
● Current technology
Chapter #2
Définitions:
● Variables: Measures that can take on different values
● Data: Recorded values of variables
● Time-series: Sets of measurements made at a different point in time
● High/low-frequency data: series with short/long intervals between observation
● Cross-section data: Values for different variables recorded at point time
(ex: Par provinces x par Mois)
● Repeated cross-section data: cross-section data recorded at regular or irregular
intervals
● Longitudinal data: Follows the same units of observation through time
● Consumer price index: Average price levels for consumer goods/services
● Index number: Value for a variable relative to the given base value
● Inflation: Annual percentage increase in consumer prices
● Deflation: Annual percentage decrease in consumer prices
● Real price: Actual price adjusted by consumer price levels
● Regression line: Representation of the average relationship between two variables
(Average on scatter plot)
● Economic equity: Distribution of well-being among members of an economy
● Incentive: Motivation (deductible off philanthropy, green energy…)
● Nominal value: Base price expressed in current dollar terms
● Econometrics: Science of quantifying relationships between economic variables
● Basket: Fixed set of consumer products/services, price evaluated frequently
,Positive/Normative Economics:
● Positive economics: Study of objective/scientific explanation of how economics
works
● Normative economics: Recommendation incorporating value judgement (political
perspective)
Formulas:
*Index= increase/decrease in time
, Tools to create models:
1. Explanations
2. Diagrams
3. Algebra
4. Data tables
5. Charts
6. Statistical tests
Simple models: Changes in mortgage rates changes house price
Broader model: House prices consider Mortgage rates, incomes, supply…
Role of the Government:
1. Provide legal framework (policies, judges, rules…)
2. Improve the efficiency of the economy
➢ Competition policy and regulation
➢ Educate the workforce
➢ International trade policies
➢ Monetary and fiscal policies
3. Redistribute to Individuals & to other levels of the government
➢ Social assistance
➢ Poor provinces
What matters:
1. Markets are critical (permit trade, specialization and efficiency)
2. Incentives matter (Predictable comportment when incentives offered)
3. Government are critical (stability, efficient operation and equitable sets of outcomes
Example composite price index non-renewable energy:
A weighted average of Coal, oil and Gas
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