Show Menu

Econ 20A Cheat Sheet (DRAFT) by

Economics final cheat sheet

This is a draft cheat sheet. It is a work in progress and is not finished yet.

Week 1


Week 2


Economics and Scracity

the study of how society manages its scarce, or limited, resources.
Economics studies all of these forces – decision making by indivi­duals, by firms, by government instit­utions
Focus is on how markets operate to allocate scarce resources
Dictators (since they might not know much about economics, it would likely fail) and government (have advisors to help plan) decide allocation
alloca­tions work through the intera­ctions of all these people through markets
from Week 1

Basic Principles of Microe­con­omics

The study of how households and firms make decisions and interact in markets.
The study of how economy wide phenomena including inflation, unempl­oyment and economic growth.
Principles of Microe­con­omics
How People Make Decisions
Principle 1
People face trade-offs
Principle 2
Opport­unity Cost
the cost of something is what you give up to get
Principle 3
People think at the margin
Principle 4
People respond to incentives
Government policies have incent­ives, sometimes uninte­nded. Sometimes don't work as intended.
How People Interact
Principle 5
Trade can make everyone better off
Principle 6
Markets are usually a good way to organize economic activity
Principle 7
Sometimes govern­ments can improve market outcomes
How the Economy Works
Principle 8
A country's standard of living depends on its ability to produce goods and services
Principle 9
Prices rise when the government prints too much money
inflation: an increase in the overall level of prices in the economy
Principle 10
Society faces a short-run trade-off between inflation and unempl­oyment


What exactly do people gain when they trade with each other?
Why do people choose to be interd­epe­ndent?

Important Concepts

Absolute Advantage
ability to produce more of a good, given inputs, then another producer
Compar­ative Advantage
the ability to produce a good at a lower opport­unity cost than another producer
better to specialize in whatever makes makes your opport­unity cost the least

Demand, Supply, and Market Equili­brium

Market Demand
Quantity demanded
amount of good buyers are willing and able to purchase
Law of Demand
all else equal, as the price rises its quantity demanded decreases
Demand Curve
a graph of the relati­onship between the price of a good and quantity demanded
Causes of shifts
normal good
if demand for a good increases when income increases
inferior good
if demand for a good decreases when income increases
Prices of related good
if price of sunstitute goes down, the demand goes down
if price of complement goes down, the demand goes up
Market Supply
Quantity supplied
amount of a good that sellers are willing and able to sell
Law of Supply
all else equal, when the price of a good rises the quantity supplied rises
Supply Curve
relati­onship between price of a good and quantity supplied
Remember to notice what makes that demand relati­onship change, i.e. the forces that would make someone want more of a good at any given price.

Market Equili­brium

a situation in which the market price has reached the level at which quantity supplied = quantity demanded

Changes in Supply and Demand

Decide whether it is: supply, demand, or both.
Decide in which direction curve shifts
Use demand­-supply graph to evaluate change.
An increase in demand.
An increase in supply.
An increase in both demand and supply

Week 3



a measure of the respon­siv­eness of quantity demanded or quantity supplied to a change in one of its determ­inants
Elastic Demand
if the quantity demanded responds substa­ntially to a price change
steeper demand curve
Inelastic Demand
if the quantity demanded responds only slightly to a price change
flatter demand curve
Types of Elasticity
Price Elasticity
measures how much quantity demanded responds to a change in price.
Price Elasticity of Demand= %Δ in Quantity Demanded / %Δ in Price
[Q2−Q1 (Q1+Q2)/2] / [P2−P1 (P1+P2)/2]
Supply Elasticity
measures how much the quantity supplied responds to a change in the price
What factors affect elasti­city?
close substi­tutes
elastic since easier for consumer to switch to a substitute good
inelastic because need to survive
elastic because don't need
time horizon
more elastic over long horizons because necess­ities can become luxuries