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AP Exam Review
AP Exam Review

AP Exam Review - PowerPoint Presentation

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UNIT 1 Basic Economic Concepts Scarcity Society has unlimited wants Economic resources are scarce Economic Resources include land all gifts of nature Labor all physical and mental talents ID: 569458 Download Presentation

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Slide1

AP Exam Review

UNIT 1 Basic Economic ConceptsSlide2

Scarcity

Society has unlimited wantsEconomic resources are scarceSlide3

Economic Resources include:

land – all gifts of natureLabor – all physical and mental talents

Capital – manufactured aids used in producing goods and services

Entrepreneurial ability – takes initiative and riskSlide4

Opportunity Cost

what must be given up in order to get something Slide5

Production Possibilities Model

Graphic representation of opportunity cost

Each point on the curve represents some

maximum output of two productsSlide6

Law of increasing opportunity cost –

the

more of a product that is produced, the greater its

opportunity

cost

Shape of the curve illustrates the lawGuns and butter is a classic economics comparison. Guns represent capital goods and butter represents consumer goods.Slide7

Increase in resources

Advances in technology

Production

possibilities curve may shift if:Slide8

Production Possibilities Curve PracticeSlide9

Assume the economy represented is presently producing 12 units of Good B and 0 units of good A.

The opportunity cost of increase production of Good A from 0

units to 1 unit is the loss of _____________ unit(s) of Good B.

The opportunity cost of increasing production of Good A from 1

unit to 2 units is the loss of ________ units(s) of Good B.The opportunity cost of increasing production of Good A from 2 units to 3 units is the loss of ______ unit(s) of Good B.This is an example of ________________ opportunity cost per unit for Good A.Slide10

Assume the economy represented is presently producing 12 units of Good B and 0 units of good A.

The opportunity cost of increase production of Good A from 0

units to 1 unit is the loss of

2

unit(s) of Good B.

The opportunity cost of increasing production of Good A from 1 unit to 2 units is the loss of 2 units(s) of Good B.The opportunity cost of increasing production of Good A from 2 units to 3 units is the loss of 2 unit(s) of Good B.This is an example of constant opportunity cost per unit for Good A.Slide11

More Production Possibilities PracticeSlide12

Assume the economy represented

Is currently producing 12 units of Good B and 0 units of Good A.

The opportunity cost of increasing production of Good A from 0 units to 1 unit is the loss of _____unit(s) of Good B.

The opportunity cost of increasing production of Good A from 1 unit to 2 units is the loss of _____ unit(s) of Good B.

The opportunity cost of increasing production of Good A from 2 units to 3 units is the loss of ____ unit(s) of Good B.

This is an example of _____ opportunity cost per unit for Good A.Slide13

Assume the economy represented

Is currently producing 12 units of Good B and 0 units of Good A.

The opportunity cost of increasing production of Good A from 0 units to 1 unit is the loss of

2

unit(s) of Good B.

The opportunity cost of increasing production of Good A from 1 unit to 2 units is the loss of 4 unit(s) of Good B.The opportunity cost of increasing production of Good A from 2 units to 3 units is the loss of 6 unit(s) of Good B.This is an example of increasing opportunity cost per unit for Good A.Slide14

More Production Possibilities PracticeSlide15

Assume that the following data represents 4 years of GDP for the US

.

Assume that “Efficient” levels of production would create 5% unemployment.

Show the four years on a

single

PPC graph.

Show each year as a point on the graph and show new frontiers if appropriate.Label the PPC graph correctly. GDP for the yearUnemployment %Year A10 Trillion Dollars10%Year B11 Trillion Dollars 5%Year C15 Trillion Dollars10%Year D

16.5 Trillion Dollars 5%

Production Possibilities Curve PracticeSlide16

Capital Goods

Consumer Goods

HINT – start like this

 

GDP for the year

Unemployment %

Year A10 Trillion Dollars10%Year B11 Trillion Dollars 5%

Year C15 Trillion Dollars

10%

Year D

16.5 Trillion Dollars

5%Slide17

Capital Goods

Consumer Goods

11 trillion

A

 

GDP for the year

Unemployment %Year A10 Trillion Dollars10%Year B11 Trillion Dollars

5%Year C

15 Trillion Dollars

10%

Year D

16.5 Trillion Dollars

5%Slide18

Capital Goods

Consumer Goods

11 trillion

A

B

 

GDP for the yearUnemployment %Year A10 Trillion Dollars10%

Year B11 Trillion Dollars

5%

Year C

15 Trillion Dollars

10%

Year D

16.5 Trillion Dollars

5%Slide19

Capital Goods

Consumer Goods

11 trillion

A

B

16.5 trillion

GDP for the yearUnemployment %

Year A

10 Trillion Dollars

10%

Year B

11 Trillion Dollars

5%

Year C

15 Trillion Dollars

10%

Year D

16.5 Trillion Dollars

5%Slide20

Capital Goods

Consumer Goods

11 trillion

A

B

16.5 trillion

CD

 

GDP for the year

Unemployment %

Year A

10 Trillion Dollars

10%

Year B

11 Trillion Dollars

5%

Year C

15 Trillion Dollars

10%

Year D

16.5 Trillion Dollars

5%Slide21

Supply and DemandChange in quantity supplied

Caused by a price change

Movement along the curve

Change in supply

caused by determinants of supply

Shift of the curve

Change in quantity demandedCaused by price changeMovement along the curveChange in demand Caused by determinants of demandShift of the curveSlide22

Price CeilingSlide23

Price FloorSlide24

Basic Economic Concepts Test QuestionsSlide25

If an effective price floor is removed from a market for good, then the price and quantity of the good

sold will change in which of the following ways?  Price

Quantity

a. Increase Increase b. Increase Decrease

c. Decrease Decrease d. No change Increase e. Decrease Increase Slide26

Which of the following would best explain an inward shift of the production possibilities curve?

a. A decrease in the quantity of inputs required to produce a unit of output. b. An increase in the rate of savings. c. A decrease in the quality of human capital

d. A decrease in the government’s budget deficit that leads to lower real

interest

rates.

e. An increase in the labor force participation rate.Slide27

The best combination of belts and coats for this economy is

a. 95 belts and 1 coat

b. 85 belts and 2 coats

c. 70 belts and 3 coats

d. 40 belts and 4 coats

e. indeterminate with the available information 

 Slide28

Which of the following could explain the movement from point B to point A?

a. An increase in consumer income.

b. An increase in the price of a complementary good.

c. An increase in the price of a substitute good.

d. An increase in the price of the good

e. None of the above.