✨ ap micro survival packs are ready!
💸 Unit 1: Basic Economic Concepts
1.0Unit 1: Basic Economic Concepts
1.1Basic Economic Concepts: Scarcity
1.2Resource Allocation and Economic Systems
1.3Production Possibilities Curve (PPC)
📈 Unit 2: Supply and Demand
2.4Price Elasticity of Supply
2.6Market Equilibrium and Consumer and Producer Surplus
2.7Market Disequilibrium and Changes in Equilibrium
2.8The Effects of Government Intervention in Markets
⚙️ Unit 3: Production, Cost, and the Perfect Competition Model
3.6Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market
📊 Unit 4: Imperfect Competition
4.1Introduction to Imperfectly Competitive Markets
💰 Unit 5: Factor Markets
5.2Changes in Factor Demand and Factor Supply
5.3Profit-Maximizing Behavior in Perfectly Competitive Factor Markets
🏛 Unit 6: Market Failure and Role of Government
6.1Socially Efficient and Inefficient Market Outcomes
6.3Public and Private Goods
6.4The Effects of Government Intervention in Different Market Structures
⏱️ 3 min read
September 12, 2020
Scarcity is the basic problem in economics in which society does not have enough resources to produce whatever everyone needs and wants. Basically, it is unlimited wants and needs vs. limited resources. Scarcity is faced by all societies and economic systems. Since we are faced with scarcity, we must make choices about how to allocate and use scarce resources.
Economics is the study of how individuals, firms, and governments deal with scarcity. As a result of facing scarcity, all members of a society have to make choices in an effort to manage our resources in the most efficient way possible. The choices we make are known as trade-offs.
Microeconomics is the study of how individuals, households, and firms make decisions and allocate resources. For example, whether a high school graduate chooses to go to college or directly into the workforce is a microeconomic decision.👨💼
Macroeconomics is the branch of economics that studies the behavior and performance of the entire economy instead of just its small parts. The current discussion on the high unemployment rate and the increasing national deficit is a macroeconomics topic. 📉
The resources that are scarce in every society are divided into four categories:
Trade-offs—each of the alternative choices that you gave up when making a decision. For example, you walk into the cafeteria for lunch at school and you have the option of pizza, a cheeseburger, or chicken sandwich for lunch. If you choose to have pizza, then the cheeseburger and chicken sandwich are your trade-offs. 🍕
Opportunity Cost—this is the value of the next best alternative when making a choice. Going back to the example of what to have for lunch, if you choose pizza but get to the front of the line and the last slice of pizza was taken by the kid in front of you, you choose a cheeseburger instead. The cheeseburger is your opportunity cost for choosing pizza because it is the next best alternative if your first choice is unavailable. 🍔
The table below shows two possible combinations of trucks and cars that can be produced given a set amount of resources. A company or country can move between the two possibilities to best meet their needs. When they move from Combo A to Combo B, they give up 6 million trucks, which is their opportunity cost for this decision. If they were producing at Combo B and moved to Combo A, their opportunity cost would be 8 million cars.
|Combo A||Combo B|
|Trucks||8 million||2 million|
|Cars||2 million||10 million|
2550 north lake drive
milwaukee, wi 53211
92% of Fiveable students earned a 3 or higher on their 2020 AP Exams.
*ap® and advanced placement® are registered trademarks of the college board, which was not involved in the production of, and does not endorse, this product.
© fiveable 2020 | all rights reserved.