Very comprehensive summary of chapters 1-9, for the midterm of the economics course. It covers everything from the book (Macroeconomics by Krugman and Wells) and includes clear explanations with graphs etc.
2024 Exam Domination with [Macroeconomics,Krugman,3e] Study Guide
Macroeconomics, Krugman - Solutions, summaries, and outlines. 2022 updated
All for this textbook (5)
Written for
Universiteit Leiden (UL)
International Studies
Economics
All documents for this subject (3)
3
reviews
By: jjlaxton • 4 year ago
By: maximeguinchard • 5 year ago
By: edanmilner • 6 year ago
Seller
Follow
Donnavaneerd
Reviews received
Content preview
MIDTERM: CHAPTERS 1-9
CHAPTER 1
Market failure: individual pursuit of one’s own interest makes society worse off.
Macroeconomics: overall ups and downs of the economy.
PRINCIPLES:
1. Choices are necessary because resources (things that can be used to produce
something else) are scarce.
2. The true cost of something is its opportunity cost (what you must give up in order to
get it).
3. “How much” is a decision at the margin (marginal decision): decision involves a
trade-off (compare costs and benefits)
4. People usually respond to incentives, exploiting opportunities to make themselves
better off.
5. There are gains from trade: the sum is greater than the parts → specialization!
6. Markets move toward equilibrium, because people respond to incentives.
7. Resources should be used efficiently to achieve society’s goals: efficiently: used in a
way that has fully exploited all opportunities to make everyone better off.
Avoid deadweight loss (with subsidies for example).
8. Markets usually lead to efficiency, because people usually exploit gains from trade:
markets principles seem to work, so many economists are pro laissez-faire.
9. When markets don’t achieve efficiency, government intervention can improve
society’s welfare: act as an external force for economic growth.
10. One person’s spending is another person’s income.
11. Overall spending sometimes gets out of line with the economy’s productive capacity:
spending too low → recession, spending too high → inflation
12. Government policies can change spending
CHAPTER 2
Slope: of a linear curve: 𝚫y/𝚫x.
of a horizontal line: zero.
of a vertical line: infinity.
of a nonlinear curve (figure
1).
, CHAPTER 3
Competitive market: many buyers and sellers of the same good/service.
DEMAND:
Demand schedule: shows how much of a good/service consumers will want to buy at
different prices.
Demand curve: graphical representation of demand schedule.
Quantity demanded: actual amount of a good/service consumers are willing to buy at a
specific price (price ↑→ quantity demanded↓, price ↓→ quantity demanded ↑).
Shift of the demand curve: change in quantity demanded at any given price.
- Leftward shift: decrease in demand.
- Rightward shift: increase in demand.
Movement along the demand curve: change in quantity demanded because of price change.
Five principal factors that shift the demand curve:
- Changes in the prices of related goods/services:
● Substitutes: rise in price of one causes increase in demand for the other
(replace each other).
● Complements: rise in price of one causes decrease in demand for the other.
- Changes in income:
● Normal good: rise in income increases demand.
● Inferior good: rise in income decreases demand.
- Changes in tastes.
- Changes in expectations.
- Changes in the number of consumers.
Individual demand curve: shows relationship between quantity demanded and price for an
individual consumer.
SUPPLY:
Supply schedule: shows how much of a good/service would be supplied at different prices.
Supply curve: graphical representation of supply schedule.
Quantity supplied: actual amount of a good/service people are willing to sell at a specific
price.
Shift of the supply curve: change in quantity supplied at any given price.
- Leftward shift: decrease in supply.
- Rightward shift: increase in supply.
Movement along the supply curve: change in quantity supplied because of price change.
Five principal factors that shift the supply curve:
- Changes in input prices.
- Changes in the prices of related goods or services:
● Substitutes.
● Complements.
- Changes in technology (supplying often gets cheaper).
- Changes in expectations.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Donnavaneerd. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £5.53. You're not tied to anything after your purchase.
