1. Revision This is not necessarily an indication of what will be, or won’t be in the exam. This is an overview of main concepts & diagrams

2. General suggestions Review main definitions –At the side of text pages or the glossary at the back Know how to recognise definitions when phrased as a scenario Characteristics of key economic situations –eg market structures, money market Identify main themes of the modules/chapters –10 principles of economics help to do this Identify key diagrams & explanations that go with those diagrams

3. Revision sources Review past few exams for structure (2002 only) Review suggested study guide exercises recommended at end of lecture or in USQ study book Set yourself practice questions or re-do those from tutes and PALS

4. Exam technique Keep in mind the relative weightings –Don’t bog down on multiple choice questions Be prepared to move on and come back to questions you find difficult Extended response –1. content most important –2. answer the specific question, especially in the conclusion –3. keep writing. It increases your chances of making a point that is worth marks

5. Introductory concepts You should be able to: –Explain each of the principles of economics –Describe and discuss the circular flow as a model and definitions of components –Identify and explain the difference between positive vs normative statements –Know about the natures and purposes of economic models

6. Opportunity Cost & Specialisation Specialisation (definition & reason for) Opportunity cost (definition) Recognise examples of opportunity cost and correctly identify the opportunity cost –eg a person stops studying and goes to the movies Plot PPFs from a table of figures

7. Correct calculation & expression of opportunity cost

8. What combinations of production are possible and not possible? Explain why/why not. Information gigabytes/yr Textiles cu m/yr * *

9. Recognise the increased consumption possibilities with trade Food (Kgs/wk) Cloth (m/wk) 9 6 36 9 15 3 12 Utopia Euphoria * Utopia consumes more with trade

10. What causes shifts in the PPF? Information gigabytes/yr Textiles cu m/yr

11. What policy/social decisions cause shifts within the frontier? Information gigabytes/yr Textiles cu m/yr 750,000 1 m 500,000 5m6.5 m 16 m * *

12. Market Definitions Change in demand/supply vs change in quantity demanded/supplied –Shift in the curve vs along the curve Competitive market Price searching Equilibrium Inferior and normal goods

13. What causes an increase/decrease in demand? Price Quantity Q1Q1 D1D1 Q2Q2 D2D2 P Q0Q0 D0D0

14. Substitutes and Complements Recognising when goods are likely to be substitutes or complements The effect a change in the price of a substitute has on the original good The effect a change in the price of a complement has on the original good

15. What causes an increase/decrease in supply? Price Quantity S0S0 P Q1Q1 Q2Q2 Q0Q0 S2S2 S1S1

16. Market Diagrams Be able to: –Draw and label a market diagram to illustrate an explanation of market principles –construct a market diagram from a table of figures –Correctly identify new price and quantity when there is a shift in supply or demand

17. What happens to equilibrium price and quantity when supply and/or demand changes? Price Quantity S0S0 P0P0 Q0Q0 D0D0 P1P1 Q1Q1 S1S1 D1D1

18. If given a scenario, show what happens to supply and/or demand and how this affects equilibrium price and quantity Price Quantity S0S0 P0P0 Q0Q0 D0D0

19. What is revenue? What happens to revenue when demand or supply changes? Price Quantity S0S0 P0P0 Q0Q0 D0D0 Q1Q1 P1P1 D1D1

20. Elasticity: What to know Definition How to do a calculation of elasticity (basic method) if given changes in price and quantity How to calculate it if given % changes If given the elasticity of a good,identify whether it is (relatively) elastic or inelastic Explain why elasticity changes along a line

21. Remember: Actual elasticity can indicate –whether elastic or inelastic –whether inferior or normal (if income elasticity) –whether goods are substitutes or complements (if cross price elasticity) Eg income elasticity = -2 –Income elastic –Normal good

22. How does the relative elasticity affect changes in producer revenue? Price ($) Quantity/wk 70 1400 D0D0 90 1000

23. Government intervention Why would governments intervene in markets? What are the forms of intervention? What happens to price and quantity? What happens to a market if government intervention ceases? –Assume it returns to equilibrium

24. Price floor (minimum price) Why will there be a surplus? How can you calculate the surplus Price Quantity S0S0 P0P0 Q0Q0 D0D0 P1P1 Q1Q1

25. Price Ceiling (maximum price) Why will there be a ‘shortage’? Price Quantity S0S0 P0P0 Q0Q0 D0D0 P1P1 Q1Q1

26. What happens to price and quantity when markets are deregulated? Price Quantity S0S0 P0P0 Q0Q0 D0D0 P1P1 Q1Q1

27. Who ‘pays’ for a tax on goods and how much do they pay? Price Quantity S0S0 P0P0 Q0Q0 D0D0 PtPt QtQt Consumer share of tax P2P2 Producer share of tax

28. How does the imposition of a tax affect consumer price/demand producer revenue and? Price Quantity S0S0 P0P0 Q0Q0 D0D0 PtPt QtQt P2P2 Initial producer revenue Producer revenue with tax

29. Macroeconomics

30. Measuring GDP: What to know Definition of GDP Define and explain components of GDP (expenditure method) Classify items/situations according to which component of expenditure they belong to How to use a deflator to derive real GDP from a nominal GDP How to use a CPI to calculate real prices from nominal prices Calculate inflation rate from production and price table

31. Growth: what to know Define and explain each of the factors of production, Y=A F(L, K, H, N) Explain how govt can influence each factor to encourage growth Categorise situations or examples according to which factor they are a part of Define and explain impact on growth of: –Catch-up effect –Diminishing returns on capital –Political stability –Population growth

32. The Financial System Define &/or identify examples of: –Components of financial markets –Financial intermediaries –Budget deficit and surplus Identify relationship in savings & investment in: –a closed economy (no overseas income) –an open economy (includes overseas income)

33. The market for loanable funds Who are the suppliers (lenders) & who are the ‘consumers’ (borrowers)? What causes changes in supply and demand of loanable funds? Draw, label and show effects of changes in supply and demand Effect of government decisions and actions on market

34. Unemployment Define and explain types of unemployment Define and explain the natural rate of unemployment Main factors that lead to an increase in unemployment Identify and categorise situations in terms of the factors that lead to an increase Draw and explain the effect of minimum wage laws on unemployment

35. Monetary System Define –functions and kinds of money –Liquidity Outline roles of central banks (eg the RBA) Explain the principles of open-market operations Understand the concept of liabilities and assets in a trading bank, especially reserves Do simple calculations of money increase based on the reserve and the money mulitplier

36. Inflation Explain causes of inflation Outline the quantity theory of money List and explain the problems with having high inflation Calculate real interest rates Calculate real after-tax interest rates

37. Trade & the Open Economy Understand the concept of net foreign investment The relationship between net exports and net foreign investment (they are equal, why?) Understand currency appreciation/depreciation Calculate the real exchange rates of products and explain the implications Explain the main principles of purchasing power parity (no need for all detail)

38. Macroeconomics of the open economy Outline the components of each of: –The market for loanable funds –The demand for net foreign investment & –The currency exchange rate market Explain the relationship between the three Show and explain what will happen when variables change with government policy or capital flight

39. AD/AS Understand the short run nature of this model What changes aggregate demand What changes supply (long run & short run) Explain and show how changes in policy or circumstance affect the price level and output

40. Analysing Policy Effects Outline the components of the supply and demand for all money in a model Know what shifts aggregate demand Explain why supply is vertical Show and explain the relationship between money in the economy and aggregate demand, which influences output and price level

41. Fiscal Policy Define and recognise examples of automatic stabilisers Purpose of fiscal policy Define and explain the mechanisms of fiscal policy (taxes and spending) Outline the direct effect on aggregate demand Problems of fiscal policy –Crowding out effect on investment –Price increases through stimulation

42. Monetary policy Purpose of monetary policy Show and explain how it works, from central bank, through money supply/demand to impact on aggregate demand

43. Unemployment/inflation trade-off Explain the principles behind the Phillips curve Explain how monetary policy can be used to control inflation Might also be useful to keep in mind the examples of how the Phillips curve shifted in Australia from the 1970s-90s

44. Policy Debates The pros and cons of active stabilisation The pros and cons of using discretionary monetary policy How much should inflation be? The pros and cons of balance budgets STUDY HARD!!!