unit 1 AP micro

PPC

a slope showing all combinations of two kinds of goods

Trade off

as you do more one one thing [fortnite] you sacrafice the other [math]

Opportunity Cost [o.c]

the sacrafice made for a benefit [e.g. u dont do 20 math problems to do 15 more rounds of fort]

a concave PPC

there is an increase in o.c

non-constant o.c

non-perfectly adaptable resources

→ occurs in concave slope

linear PPC

a constant rate of o.c being lost

perfectly adaptable resources

constant o.c

→ linear slope

Product efficient is in place

Points are on the line

inefficient production

Points are inside the line

It’s out of the bounds of resource availability (impossible)

Dots are outside the line

A specialization is cake

Point shifts up or down to cake

“Unemployment/ recession” in PPC

Point inwards

“Short run” in PPC

point shift up or down

Loss of resources (e.g land, destructive war, no labor)

Shift inwards

Improved tech for production

Shift out for a single source or both

Increase in resources (e.g. captial goods/labor/land)

Shift out

utility

satisfaction of a good or service from the consumer

Law of diminishing Marginal utility

satisfaction goes down as you consumer each additional unit

Law of diminishing Marginal utility

Graph

MU decreases, TU increases at a decreasing rate.

→ when MU reaches negative numbers TU starts to decrease

Utility Maximizing Combinations

formula and Definition

the combination of what you buy for the most amount of MU

MU_{[of product a]} divided by its price = MU_{[of product b]} divided by its price

MU of a sandwich is higher than the soda

how would u answer this

You want more of sandwich [higher MU] and less of the soda [lower MU] bc more utility per dollar makes the most of youre money

MU maximizing combos with budget constraint

find the MU/$ for each unit, then starting from one pick which is the highest 

then proceed just like that for the two’s until you reach the max amount of dollars you have [e.g. $6 budget = 6th column]