AP Microeconomics – Unit 1 Basic Economic Concepts

1.1 Scarcity Cornell Notes

Emphasize scarcity, choices, and opportunity cost. Introduce economics vocabulary, positive and normative statements, and factors of production.

Scarcity is the basic problem that gives rise to economics.

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1.2 Resource Allocation and Economic Systems Cornell Notes

Resource allocation involves three economic questions every economy must answer:

1. What are we going to produce?
2. How are we going to produce it?
3. Who gets to consume it?

The way they answer those questions determines the economic system.

This is a nice place to introduce the Circular Flow Model to show how goods/services and money flow through an economy.

The Circular Flow Model Diagram – Free Download!

1.3 Production Possibilities Curve Cornell Notes

The Production Possibilities Curve is a simple model that shows

• tradeoffs
• opportunity cost
• efficiency
• resource allocation
• underutilized resources
• economic growth/contraction

1.4 Comparative Advantage and Trade Cornell Notes

Absolute advantage, comparative advantage, and terms of trade. Emphasize that both parties are better off with trade and each party should specialize in the good/service that they have comparative advantage in. Review the concepts of exporting and importing.

1.5 Cost-Benefit Analysis Cornell Notes

Continuing the concept of opportunity cost, this section introduces implicit and explicit costs to making a decision. Explore total benefits vs. net benefits.

1.6 Marginal Analysis and Consumer Choice Cornell Notes

Using marginal benefit and marginal cost, find the optimal consumption bundle that maximizes consumer satisfaction.

AP Micro Unit 1 Review – Link to a Google Slides version included. From Google Slides you can download the file as a PowerPoint version too.