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.