Every Graph to Know for AP Macroeconomics

Production Possibilities Curve (PPC)

A graphical representation showing the maximum combinations of two goods that can be produced with available resources and technology.

Inefficient Use of Resources

Occurs at a point inside the PPC where resources are not fully utilized, indicating inefficiency.

Scarcity

The limited availability of resources, which restricts production beyond the PPC.

Increasing Opportunity Costs

The situation where the rate of trade-off between two goods increases as production of one good rises, represented by a concave PPC.

Constant Opportunity Costs

When the PPC is a straight line, indicating that resources are equally adaptable for producing both goods.

Outward Shift of the PPC

Indicates economic growth due to an increase in resource quantity or quality or technological improvements.

Inward Shift of the PPC

Represents a decline in production capacity due to a decrease in resource quantity or quality.

Law of Demand

States that if all other factors are held constant, an increase in the price of a good leads to a decrease in quantity demanded.

Movement Along the Demand Curve

Changes in quantity demanded due to changes in the price of the good itself.

Quantity Demanded

The specific amount of a good that consumers are willing to buy at a particular price.

Demand

The overall relationship between prices and the quantity demanded across different price levels.

Non-Price Determinants of Demand

Factors other than price that can lead to a shift in the demand curve, such as consumer tastes and income.

Consumer Tastes and Preferences

Changes in consumer preferences that can shift the demand curve to the right or left.

Market Size

The number of consumers in the market, which affects overall demand.

Prices of Related Goods

The impact of the price of substitutes and complements on demand for a particular good.

Expectations of the Future

Expectations about future economic conditions that can influence current demand.

Law of Supply

States that, all else being equal, an increase in price results in an increase in quantity supplied.

Movement Along the Supply Curve

Changes in quantity supplied due to changes in the price of the good itself.

Non-Price Determinants of Supply

Factors that can shift the supply curve, such as costs of production and technology.

Equilibrium Price

The price at which quantity supplied equals quantity demanded.

Surplus

Occurs when quantity supplied exceeds quantity demanded at a given price.

Shortage

Occurs when quantity demanded exceeds quantity supplied at a given price.

Double Shift in Supply and Demand

When both supply and demand curves shift simultaneously, affecting equilibrium price and quantity.

Aggregate Demand (AD)

The total demand for all goods and services in an economy at various price levels.

Inflation

The rate at which the general level of prices for goods and services is rising.

Phillips Curve

A graphical representation that shows the inverse relationship between inflation and unemployment.

Foreign Exchange Market

The market in which currencies are traded, determining exchange rates.

Business Cycle

The cycles of economic expansion and contraction experienced by an economy over time.

Leading Indicators

Economic factors that can predict future economic activity.

Lagging Indicators

Economic factors that confirm trends that have already occurred.

Coincident Indicators

Economic factors that occur in real time and provide immediate insights into the state of the economy.