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overall review of AP macro economics. topics from all units.
Economics
Social Science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic want and needs.
Scarcity
The condition in which wants exceed the limited supply of resources.
Marginal
Additional
Increasing Marginal Returns
Each additional unit increases the output more than the previous unit did. For example, each additional hired worker provides more output than the previous hired worker did.
Diminishing Marginal Returns
Each additional unit increases the output by less than the previous unit did. For example, each additional hired worker increases the output but not by as much as the last hired worker.
Negative Marginal Returns
Each additional unit decreases the output. The addition of more workers causes overall production to decline.
5 Key Economic Beliefs
Scarcity: Society’s wants are unlimited but all resources are limited
Trade-Offs and Opportunity cost: Due to scarcity, choices must be made (Trade-offs) and every choice has a cost (opportunity cost)
Satisfaction: Everyone’s goal is to maximize their satisfaction
Rationality: Everyone acts rationally by comparing marginal costs and benefits
Models: Real-life situations can be explained by simplified models and graphs
Trade-Offs
All alternative choices that are given up when one course of action is taken over another.
Opportunity Cost
The value of the most desirable alternative given up as a result of a decision.
Utility
Satisfaction
Allocate
Distribute
Shortage
Occurs when producers cannot or will not offer goods and services at current prices. They are temporary.
