AP MICROECONOMICS UNIT #1



AP MICROECONOMICS UNIT #1

BASIC ECONOMIC CONCEPTS

GEORGIA PERFORMANCE STANDARDS IN THIS UNIT

Fundamental Economic Concepts

SSEF1 The student will explain why limited productive resources and unlimited

wants result in scarcity, opportunity costs, and trade offs for individuals, businesses,

and governments.

a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.

b. Define and give examples of productive resources (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).

c. List a variety of strategies for allocating scarce resources.

d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.

SSEF2 The student will give examples of how rational decision making entails

comparing the marginal benefits and the marginal costs of an action.

a. Illustrate by means of a production possibilities curve the trade offs between two options.

b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.

SSEF3 The student will explain how specialization and voluntary exchange

between buyers and sellers increase the satisfaction of both parties.

a. Give examples of how individuals and businesses specialize.

b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.

SSEF4 The student will compare and contrast different economic systems and

explain how they answer the three basic economic questions of what to produce,

how to produce, and for whom to produce.

a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation.

b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.

SSEF6 The student will explain how productivity, economic growth, and future

standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people.

a. Define productivity as the relationship of inputs to outputs.

b. Give illustrations of investment in equipment and technology and explain their relationship to economic growth.

c. Give examples of how investment in education can lead to a higher standard of living.

Microeconomic Concepts

SSEMI1 The student will describe how households, businesses, and governments

are interdependent and interact through flows of goods, services, and money.

a. Illustrate by means of a circular flow diagram, the Product market; the Resource market; the real flow of goods and services between and among businesses, households, and government; and the flow of money.

International Economics

SSEIN1 The student will explain why individuals, businesses, and governments

trade goods and services.

a. Define and distinguish between absolute advantage and comparative advantage.

b. Explain that most trade takes place because of comparative advantage in the production of a good or service.

SSEIN2 The student will explain why countries sometimes erect trade barriers and

sometimes advocate free trade.

d. List specific examples of trading blocks such as the EU, NAFTA, and ASEAN.

COLLEGE BOARD STANDARDS IN THIS UNIT

I. Basic Economic Concepts . (8–14%)

A. Scarcity, choice, and opportunity cost

B. Production possibilities curve

C. Comparative advantage, absolute advantage, specialization, and trade

D. Economic systems

E. Property rights and the role of incentives

F. Marginal analysis

READING ASSIGNMENTS

1. Chapter 1: pp. 3-11.

2. Chapter 2: pp. 28-41.

3. Chapter 1: pp. 11-18.

4. Chapter 5: pp. 84-89.

5. Chapter 5: pp. 96-100.

6. Chapter 5: pp. 89-92.

7. Chapter 35: pp. 675-682.

LECTURES

1. An Economic Way of Thinking.

2. Economic Systems and Goals.

3. Production Possibilities Curves.

4. Intro to international trade.

5. Absolute and Comparative Advantage and fair trade.

1. TEXTBOOK STUDY QUESTIONS

1. Chapter 1: 3, 5, 6, 7, 10, 11, 12, 13, 14.

2. Chapter 2: 1, 2, 3, 4, 11, 12, 14.

3. Chapter 5: 4 a-b, 5, 9, 10, 12.

4. Chapter 35: 3, 4, 5, 13.

1.

UNIT GRAPHS

See handout

REFLECTION PAPERS

See handout

QUIZZES

1. Economic basics and the Circular Flow. (1)

2. Economic systems and economic goals. (2)

3. Production possibilities. (3)

4. Absolute/Comparative Advantage/Fair Trade. (4)

TEST PRACTICE

1. Sample Multiple Choice.

2. Sample Free Response.

TESTS Unit Test #1: Aiming for August 24th

OBJECTIVES

1. List and discuss the four types of resources.

2. List the assumptions of the production possibilities table/curve.

3. Discuss the possible applications of production possibilities analysis.

4. Identify the 3 economic questions and discuss how they are answered in the three major economic systems.

5. List trading block, their members, and their agreements/procedures.

6. List and define social/economic goals and discuss how each economic system addresses them.

VOCABULARY

Economics

Microeconomics

Macroeconomics

Positive statement

Normative statement

Scarcity

Trade-offs

Opportunity cost

Incentives

Traditional economy

Command economy

Market economy

Mixed economy

Private property

Self-interest

Competition

Equity

Efficiency

Production possibilities curve

Factors of production

Capital good

Consumer good

Economic growth

Productive efficiency

Allocative efficiency

Marginal analysis

Marginal benefit

Marginal cost

Law of increasing opportunity cost

Absolute advantage

Comparative advantage

Specialization

Opportunity cost ratio

Terms off trade

Trading possibilities line

Gains from trade

Circular flow

Product market

Factor market

Offshoring

Dumping

Voluntary export restraint

Embargo

Standards

Subsidies

European Union

NAFTA

GATT

WTO

ASEAN

MFN

Multinational Corporation

GRAPH/CHART/APPLICATION SKILLS (BE ABLE TO DRAW THEM TOO)

1. Interpret a production possibilities table and/or chart.

2. Solve for opportunity cost using a PPC or table.

3. Analyze the circular flow model of goods and services.

4. Solve for absolute and comparative advantage in production of two products by two countries and be able to identify a fair trade.

5. Demonstrate how trade increases countries’ consumption beyond their own PPC.

6. Interpret a marginal benefit/marginal cost graph.

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