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AP Micro Unit1.1 Opportunity Cost [Autosaved] 2

Economic Principles Overview

Success Starter Concept

  • Introduction to economic principles.

  • Discusses the importance of fiscal reserves and their impact on economic cycles, production, unemployment, GDP, and public money.

  • Key terms: Demand, Cost, Trade Opportunity, Budget, Productivity, Scarcity, Inflation.

Understanding Scarcity

  • Definition of Scarcity: Scarcity entails making choices due to unlimited wants and limited resources.

  • Important Distinction: Scarcity does not equal shortage; scarcity is a constant issue in economics.

  • A scarce good requires the utilization of its availability, limiting others' access.

Non-rivalrous Goods

  • Definition of non-rivalrous: Goods that can be consumed without impeding others' consumption.

  • Examples include digital content or public parks where one person's use does not diminish availability to others.

The Economizing Problem

  • Society's dilemma: Unlimited wants vs. Limited resources leads to the economizing problem.

  • Historical consequences of scarcity explored include economic downturns and developmental challenges faced by societies.

Consequences of Scarcity

  • Natural consequences include:

    • Famine

    • Drought

    • Starvation

    • Poverty

    • War

    • Imperialism

  • These consequences highlight the pressing need for efficient resource management within societies.

Access to AP Microeconomics

  • Students need codes for AP Classroom:

    • Period 3 join codes:

      • AP Microeconomics: M2ZP4L

      • AP Macroeconomics: ZDAYR4

    • Period 4 join codes:

      • AP Microeconomics: VM2ZN6

      • AP Macroeconomics: QPENA7

Discussion Question Economics

  • Discussion Prompt: Encourages student engagement by discussing their understanding of economics and its application in real-world scenarios.

What is Economics?

  • Comparison of economics to social studies and chemistry focuses on systematic and analytical approaches to understand human behavior.

  • Key Learning Components:

    • Graphs

    • Vocabulary

    • Basic math application for concepts

  • Emphasis on practical applications in examinations through case studies and problem-solving.

Micro vs. Macro Economics

  • Microeconomics: Focus on smaller economic units, e.g., individuals, firms, industries.

    • Examples: Supply and demand, production costs, labor markets.

  • Macroeconomics: Studies the economy as a whole or aggregates.

    • Examples: Economic growth, government spending, inflation, unemployment.

Do Now - Economics Questions

  • Economics Focus: Which aspects are central to the study of economics?

    • Hypothesis testing, allocation of resources, public policy, group behavior.

6 Key Economic Assumptions

  • Unlimited wants vs. limited resources (scarcity).

  • Consequence of scarcity: Choices have costs (opportunity cost).

  • Decisions are made to maximize satisfaction.

  • Decisions are compared on marginal costs and benefits.

  • Ceteris Paribus: Other factors remain constant for simplification in analysis.

  • Real-life analysis conducted through simplified models to understand complex systems.

Public vs. Private Goods

  • Characteristics: Public goods are non-excludable and non-rival, whereas private goods are excludable and rival.

  • Majority result in rivalry due to scarcity.

  • Examples of Public Goods: Military services, public parks, and street lighting that can benefit all without competition.

Types of Goods

  • Classification of Goods:

    • Excludable vs. Non-Excludable

    • Private Goods: Rivalrous (e.g., food, clothing)

    • Common Goods: Rivalrous (e.g., fish stocks, timber, where overuse diminishes availability).

    • Club Goods: Non-Rivalrous (e.g., cinemas, private swimming pools).

    • Public Goods: Non-Rivalrous (e.g., national defense, public education).

Economic Riddle

  • Engaging question on identifying rival resources from given options to encourage critical thinking.

Opportunity Cost

  • Definition: Opportunity costs encompass alternative choices that are sacrificed when decisions are made.

  • Importance of Trade-offs: Understanding trade-offs is crucial for decision-making in resource allocation.

Key Economic Terms

  • Opportunity Cost: Best alternative given up when a choice is made.

  • Trade-offs: All alternatives considered when making a choice.

  • Marginal: Referring to one additional unit in decision analysis.

  • Ceteris Paribus: Latin for 'all else constant' for simplifying assumptions.

Trade-offs and Opportunity Costs

  • Every decision made entails trade-offs and opportunity costs, illustrated through practical examples (e.g., choosing a college or investment).

Do Now - Economic Problems

  • Identifying fundamental economic problems faced by countries: limited resources and unlimited wants.

Accountants vs. Economists

  • Cost Perspectives:

    • Accountants: Focus on explicit costs (out-of-pocket expenses).

    • Economists: Consider both explicit and implicit costs, including the value of time and forgone income.

Opportunity Cost Example

  • Example scenario describing opportunity costs in personal decisions (e.g., travel vs. employment opportunities).

Entrepreneurs and Production

  • Role of Entrepreneurs: Entrepreneurs play a pivotal role by combining resources to create goods and services, driving economic growth and innovation.

  • They take risks to seek profits, thus fostering competitive markets.

Factors of Production

  • Key Factors: Land, Labor, Capital, and Entrepreneurship are essential resources for production processes. Understanding their impact on costs and outputs is key in economic theory.

Land Defined

  • Characteristics of Land: Natural resources serve as both inputs for production and as final goods.

  • Examples: Agricultural land, minerals, oil fields illustrating the dual role in economic systems.

Labor Defined

  • Characteristics of Labor: Labor encompasses the effort made by individuals for which they are compensated.

  • Human Capital: Skills and education of labor impact productivity significantly. Examples illustrate variations in labor quality.

Physical Capital Defined

  • Characteristics of Physical Capital: Physical capital comprises tools and machinery used in the production process.

  • It is essential to differentiate production inputs from the costs associated.

Production Factors Case Study

  • Analyze various ingredients and their categorization as factors of production within a diner framework to solidify comprehension of production resources.

Free Market System Concept

  • Overview of capitalism and free market principles focusing on supply and demand dynamics, competition, and consumer sovereignty.

Adam Smith and Capitalism

  • Historical Background: Adam Smith's contributions to economics, especially the concept of self-interest and limited government roles in market economies, have laid foundations for modern economic thought.

Characteristics of Free Market

  • Characterized by minimal government intervention, private ownership, profit motives, variety in consumer goods, competition, and associated regulatory dynamics.

The Invisible Hand Concept

  • Explanation: Describes how individual self-interest inadvertently promotes society's goals, driving efficiency and regulating scarce resources in a free market environment.

Pros and Cons of Capitalism

  • Advantages: Economic freedoms, competition leads to quality and innovation; stimulating growth.

  • Disadvantages: Potential market failures, wealth polarization, cyclical economic factors, and ethical concerns.

Centrally-Planned Economies (Command Economy)

  • Definitions and Context: An overview describes socialism and communism, emphasizing the roles of government control over resources and decision-making.

Success Starter on Resource Allocation

  • Poses questions regarding statements on resource allocation in market economies, prompting critical thinking about economic theory.

History of Communism

  • Karl Marx's Theories: Overview of Marx's class struggle theory and socio-economic dynamics that underpin communist ideology.

Stages of Economy According to Marx

  • Marx’s lifecycle of economics illustrates the progression through varying economic systems, facilitating a roadmap toward communism.

History of Communism Implementation Challenges

  • Examines Lenin's actions during the Russian Revolution and describes strategies faced when applying communist principles practically.

Centrally Planned Economies Defined

  • Government Control: A description of government ownership and decision-making in centrally planned economies like Cuba and North Korea, highlighting the consequences of this approach.

Centrally Planned Economy Benefits

  • Advantages: Discusses employment, communal planning, and provision of essential public services as benefits of centrally planned economic structures.

Centrally Planned Economy Disadvantages

  • Drawbacks: Addresses lack of incentives, potential for innovation stagnation, bureaucratic inefficiencies, and limitations on individual freedoms.

Mixed Economies Overview

  • Continuum of Mixed Economies: Understanding various countries that exhibit differing levels of central planning versus free markets, blending elements from both systems.

Economic Goals of Society-Equality Income Analysis

  • Examines income growth discrepancies across different levels from 1976 to 2011, revealing trends in inequality.

Wealth Inequality in America

  • Discussion addressing the perception versus reality of wealth distribution in the U.S., showcasing statistics and historical context.

Economic Contrast - North vs. South Korea

  • Comparative GDP statistics illustrating economic disparities between North and South Korea, serving as case studies for economic systems in practice.

Capitalism Benefits Environmental Advancements

  • Highlights notable inventions and innovations attributed to capitalistic frameworks, focusing on sustainability and technological progress.

Historical Perspective on Capitalism

  • Capitalism's Long-Term Impact: Historical insights into how capitalism has fostered wealth globally since the 16th century, including the roots and evolution of economic systems.