Economics Final Exam Study Guide PDF

**\*\*Study Guide for Economics FINAL Exam\*\*** [Chapter 1: What is Economics?] Key Concepts: \- Capital Goods: Manufactured goods needed to produce other goods and services. \- Economic Interdependence: Actions in one part of the world impact economies elsewhere. \- Paradox of Value: The cont...

**\*\*Study Guide for Economics FINAL Exam\*\*** [Chapter 1: What is Economics?] Key Concepts: \- Capital Goods: Manufactured goods needed to produce other goods and services. \- Economic Interdependence: Actions in one part of the world impact economies elsewhere. \- Paradox of Value: The contradiction where necessities have little value, but non-necessities have high value. \- Division of Labor: Specialization in specific tasks for efficiency, commonly seen in assembly line production. Practice Questions: 1\. Capital goods are the tools and equipment used in production. 2\. \*\*Economic interdependence refers to global or national economic effects. 3\. The paradox of value highlights differing values of necessities vs. non-necessities. 4\. Division of labor is a hallmark of assembly line production [Chapter 2: Economic Systems and Decision Making] Key Concepts: \- Command Economy: Government makes major economic decisions. \- Market Economy: Consumer choices drive production; the USA is an example. \- Economic Goals: Efficiency, growth, equity, and stability. \- Voluntary Exchange: Free market transactions benefit both buyer and seller. Practice Questions: 6\. In a command economy, the government makes major economic decisions 7\. The USA is an example of a market economy 8\. Entrepreneur is not a social goal 9\. In a free enterprise economy, consumers determine production. [Chapter 3: Business Organizations] Key Concepts: \- Partnerships: Legal arrangements where partners share or limit liabilities. \- Corporations: Separate legal entities with limited liability. \- Nonprofits: Provide services without profit motives, e.g., Chambers of Commerce. \- Mergers: Horizontal (same product), Vertical (different production steps). Practice Questions: 15\. A limited partnership has limited liability for inactive partners 16\. The Securities and Exchange Commission regulates stock sales. 17\. Vertical mergers involve different steps in production/marketing. 18\. Nonprofits can provide goods and services to members. [Chapter 4: Demand] Key Concepts: \- Law of Demand: Lower prices lead to higher demand. \- Substitutes and Complements: Products can replace or enhance each other. \- Elasticity: Sensitivity of demand to price changes. Practice Questions: 35\. Higher prices typically result in demand for fewer products 36\. Milk and cereal are complements 38\. Inelastic demand shows little change despite price changes. 41\. Replacing a costly item shows the substitute effect [Chapter 5: Supply] Key Concepts: \- Law of Supply: Higher prices lead to higher quantities supplied. \- Supply Curve: Typically upward sloping. \- Factors Affecting Supply: Inputs, productivity, taxes, and regulations. Practice Questions: 45\. The law of supply states that supply varies directly with price. 46\. Fewer sellers reduce supply 49\. More regulations shift the supply curve to the left [Chapter 6: Prices and Decision Making] Key Concepts: \- Market Equilibrium: Balance of supply and demand. \- Surplus and Shortage: Price adjustments address mismatches. \- Competitive Pricing: Ensures optimal resource allocation. Practice Questions: 51\. Competitive markets trend toward equilibrium 52\. A shortage causes prices to increase 53\. A surplus causes prices to decrease. [Chapter 9: Taxation] Key Concepts: \- Effective Taxes: Must be equitable, simple, and efficient. \- Tax Principles: Benefit and ability-to-pay principles. \- Tax Loopholes: Exceptions in laws that allow tax avoidance. Practice Questions: 55\. Taxes do not remove revenue sources 56\. Effective taxes prioritize equity, simplicity, and efficiency 57\. Ability-to-pay taxes individuals based on their capacity 58\. Exceptions are called tax loopholes [Chapter 12: Savings and Investments] Key Concepts: \- Capital Formation: Driven by savings and investments. \- Financial Intermediaries: Bridge savers and borrowers. \- Bond: Have components like coupon, maturity, and par value. \- Markets: Capital (long-term) vs. money (short-term). Practice Questions: 59\. Savings support capital formation 60\. Banks act as financial intermediaries 64\. A bond's principal is its par value 66\. Capital market deal with loans over a year. [Building Wealth] Key Steps: 1\. Build an emergency fund 2\. Avoid debt (e.g., credit cards). Practice Questions: 69\. Step one is to build your emergency fund 70\. Avoiding credit cards aligns with staying debt-free