Rami’s Ap Macroeconomics Blog

*Absolute advantage Who can produce the same output with fewer resources -Example: papa johns can produce more pizzas than McDonald’s * Comparative advantage Who can produce the product with the lowest opportunity cost. *Means of measurement::::::: *Output :  Tons per acre, miles per gallon, words per minute, apples per tree, and computers produced per hour -When looking at an output problem, you’re looking at what they give up over what they produce *Input Number of hours to do a job, number of gallons of water to fill a pool and number of acres to feed a cow. *Balance on Goods and services Goods exports+service exports-goods imports+service imports *The formula for the balance of trade Good exports+good imports *Capital account Foreign purchase of assets+US purchases of assets *Foreign exchange Buying and selling of currency. *Appreciation A strong dollar, the dollar buys more of another currency and results ...

*The balance of payments : measures of money inflows and outflows between the US and the rest of the world. -is divided into 3 accounts Current account Capital/financial account Official reserves                                                                                                                                                                                       Inflows : known as credits, outflows are known as debits. Current account: balance/net exports -Exports-imports -Exports is credit/assets -Im...

•   Costs: -Total Revenue: Price * Quantity -Fixed Cost: A cost that doesnt change no matter how much of a good is produced. Ex. Salary, mortgage, insurance. -Variable Cost: A cost that rises and falls depending upon how much is produced Ex. Electricity, cell phone bill. -Marginal Cost: The cost of producing one more unit of a good -Revenue: Bring in - must always have $ sign; cost - goes out -Marginal Revenue: The aditional income from selling another unit of a good.\ •  Equations (reversable): TFC + TVC = TC AFC + AVC = ATC TFC / Q = AFC TVC / Q = AVC TC / Q = ATC Δ TC  /  Δ Q = MC  

•   Opportunity Cost: -Opportunity cost: The next best alternative that you must give up in order to yet something else. -Law of Increasing Opportunity Cost: As you produce more of one good, the opportunity cost ( the forgone production of another good) will increase •   Productive efficiency vs allocative efficiency:  -Productive efficiency: Products are being produced in the least costly way. (points on the curve) (though we have not yet learned this form of graph, i feel it effectively portays the concept of productive efficiency.) -Allocative Efficiency: The products being produced are most desired by the society. (points everywhere)

•  Positive vs normative economics: -Positive economics: Claims that attempt to describe the world as it is; Very descriptive. Ex. Minimum wage laws cause unemploymernt. -Normative ecconomics: Claims that attempt to prescrive how the world should be; Very prescriptive, based upon opinion. Ex. The government should raise the minimum wage. •   Wants, Needs, Scarcity, Shortage, and Surplus: -Wants: Desires of the citizens. -Needs: Basic requirements for our survival -Scarcity: it is the fundamental economic problem that all societies face. Unlimited wants with limited resources. -Shortage: Quantity demanded is greater than quantity suplied; Price goes up ^ -Surplus: Quantity supplied is greater than quantity demanded; Price goes down. v •   4 Factors of Production: 1.)Land (natural resources) 2.)Labor (work exerted)  3.)Capital (human vs physical, see below)  4.) Entrepreneurship (must be a risk taker) 3.)A.)...

•  Point location meanings: -Point on the inside: A : Underemployment, unemployment, under-utilization; Attainable but inefficient  -Point on the curve/frontier: B : Effective allocation of resources. -Point outside of the curve: C: Technology/Economic growth; Unattainable  •   Movement of the ppg: 1.) Inside of the curve: resources or labor are not being used to maximum efficiency 2.) Along the curve: resources and labor are being used to maximum efficiency 3.) Shifts of the curve: resources or labor are being used at a different rate