May 24, 2004
Strategy for an Exam
For each of the following elements, you should know how to draw and explain the diagram/equations. If you want to score more points, you should be able to play shift the curves.
Theory of the Consumer
Two Goods - Two Prices
Theory of the Firm
U-Shaped Average Cost Curves
Why did we do these two exercises?
The Classical Model
Production Function
Labor Supply and Demand
AS & AD
Loanable Funds
Labor-Leisure (the 5th diagram)
The Simple Keynesian Model
Diagram
Equations
Review for MT 1
Derive the aggregate demand curve:
Show the effects of an increase in the money supply:
Derive the labor supply curve:
Is it a good idea to concentrate on the upward sloping portion?
An example that illustrates how economics instructors use the most understandable choices for diagram arrangements. We could do an income increase by putting income on the vertical axis of the diagram and letting price changes shift the curves. Is this a good idea?
Lump sum taxes and transfers are pure income effect. Which way does the labor supply curve go?
One possibility:
The effect of an increase in government spending:
What happens to the other diagrams?