Rami’s Ap Macroeconomics Blog

•   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

-Production possibility graph, curve, or frontier, or PPG, PPC, PPF. -Show alternate ways to allocate resources; show us the most that society can produce if it uses every available resource to the best of it's ability. •  Key assumptions: -Full employment: (Not that everyone is working) You cant have 100% employment due to manyt factors. It simply means 80 to 90% factory capacity or a 4-5% unemployment rate. -Productive efficiency: A situation in which the economy could not produce any more of one good without sacrificing production of another good. -Fixed resources: Land, Labor, Capital -Fixed technology: Technology stays the same relative to the period used. -No International trade: No international trade is happening or is represented by the graph. -Two goods produced: Assuming there are only two goods produced and represented on the given graph.

Business Cycle: Fluctuations in economic activity that an economy experiences over a period of time. •  There are 4  points to a Business Cycle: 1.) Expansion: A period of economic upturn when output and employment are rising 2.) Peak: The highest point, where business activity has reached a temporary maximum 3.) Contraction: Recession, period of decline of total output, income, and employment. 4.) Trough: The lowest point, turns from a recession to a depression

Price Elasticity of demand: -Tells us how drastic buyers will cut back or increase their demand for a good when the price rises or falls. •   3types: Elastic demand, Inelastic demand, unitary elastic demand. -Elastic demand: product is said to be elastic when demand will change greatly given a small change in price. Has many substitutes. Wants such as steak, fur coat. Number is greater than one. -Inelastic demand: product is said to be inelastic if the demand for it will not change regardless of price. Needs such as water, gas, few substitutes. Number is less than one. -Unitary elastic demand: perfect society, equal to one. TR: Total revenue: Price * Quantity - Uses $ (dollar) sign.