ap econ: ch.1 - scarcity, opportunity cost & PPC

what can you say about the price associated with resources that are scarce?

the prices for products made with scarce resources are more expensive than those that aren't because there is only a limited amount of it (which therefore limits the number of people able to buy it).

what is the opportunity cost of a student deciding to go to college rather than entering the workforce?

the opportunity cost of going to college is not earning money

what is the opportunity cost of a student that has an economics and calculus test on the same day but chooses to study for economics?

the opportunity cost of studying for economics is not getting enough time to prepare for calculus (& potentially failing it!)

what is the opportunity cost of a student foregoing his senior year of college to turn pro ?

the opportunity cost of turning pro is foregoing education

what is the opportunity cost of a student spending his/her lunch money on pizza rather than a healthier option?

the opportunity cost of spending money on pizza is giving up nutrition.

If a point on a production possibilities curve is underneath the curved line, what does it mean?

it means that the economy is under producing & that there are idle resources due to unemployment.

if a point is on the production possibilities curve is on the curved line, what does it mean?

it means that the economy is efficiently producing to it's capacity & that there is full employment.

If a point on a production possibilities curve is above the curved line, what does it mean?

it means that production is unattainable because there are not enough resources.

what change would cause the production possibilities curve to shift right from the original curve?

discovery of new resources, technological innovations, increase in consumer goods, economic growth, or improved education

increasing opportunity cost

the opportunity cost of producing additional units of goods rise as society produces more of that good // concave

decreasing opportunity cost

where the opportunity cost of producing each additional item is less // convex

constant opportunity cost

an opportunity cost that remains the same as consumers shift purchases from one product to another along a straight-line budget line.

zero opportunity cost

exists when someone doesn't give up anything in choosing to do something else

what is economics?

it revolves around the efficient use of scarce resources to achieve maximum satisfaction of economic wants

5 economic assumptions

1. society's wants are unlimited, but all resources are limited (scarcity)

2. due to scarcity, choices must be made. every choice has a cost (a trade-off)

3. everyone's goal is to make choices that maximize their satisfaction. everyone acts in their own "self-interest."

4. everyone makes decisions by comparing the marginal costs benefits of their choices.

5. real-life situations can be explained and analyzed through simplified models and graphs

opportunity cost

cost of the next best alternative use of money, time, or resources when one choice is made rather than another

4 factors of production

land (natural resources), labor (a person designated to do the task), capital (human-made tools), & entrepreneurship (leaders/companies)

4 assumptions of PPC

-only two goods can be produced

-full employment of resources

-fixed resources

-fixed technology

law of increasing opportunity cost

producing more of one good will result in the increase of opportunity cost