AP Economics

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Unit 1, Lesson 6A: Absolute and Comparative Advantage

This lesson on absolute and comparative advantage will be on the Basic Economic Concepts portion of the AP examination(s). Different countries have different resources, causing them to have different production possibilities, as learned in past lessons. Thus, comparing different countries will demonstrate that certain countries will be better or worse at producing certain products than other countries. For instance, let us say that Countries A and B both produce apple juice and orange juice. Here are the production possibilities for Country A, given their current resources: Here are the production possibilities for Country B, given their current resources: When glancing at the production possibilities of both countries, it is evident that Country A produces more apple juice than Country B when given the same amount of resources. Therefore, Country A has an absolute advantage in the production of apple juice. Likewise, Country B produces more orange juice than C

Unit 1, Lesson 5: Shifting the Production Possibilities Curve

This lesson on shifting the production possibilities curve will be on the Basic Economic Concepts portion of the AP examination(s). The production possibilities curve, as we know, shows the relationship between two options (one on the x-axis, the other on the y-axis) and how the opportunity cost of obtaining one over the other changes. In the last lesson, we learned different ways the curve can look based on different opportunity costs. In this lesson, we will analyze how the same curve can shift. Before we begin, let us cover what capital and consumer goods are. Capital goods are essentially those which are utilized in the production of other goods. Consumer goods are those which are made available to the general public for personal use. First, we can quickly cover how the curve can be shifted inward or to the left . This is extremely uncommon and won't appear on your AP examination, but is good to know because it helps us understand. For instance, let us use th

Unit 1, Lesson 4: Variations of the Productions Possibilities Curve

This lesson on changing the production possibilities curve will be on the Basic Economic Concepts portion of the AP examination(s). As we learned in the last lesson, the production possibilities curve shows the relationship between two options (one on the x-axis, the other on the y-axis) and how the opportunity cost of obtaining one over the other changes. We also learned that opportunity cost tends to increase as the production of a good increases, giving the curve its shape. However, there are cases in which the production possibilities curve is not curved. For example, let us assume that the production abilities of Super Snacks change such that their new combinations of production are as shown in the table. If we analyze the opportunity cost from point to point within the table, we can notice a clear trend: for every taco produced, the production of 4 burritos is foregone each and every time. This is a situation in which a pair of goods has a constant opportunity cos

Unit 1, Lesson 3: The Production Possibilities Curve

This lesson on the production possibilities curve will be on the Basic Economic Concepts portion of the AP examination(s). As we learned in the last lesson, opportunity cost is the next best alternative to a choice made in a trade-off , a decision in which a party gains one thing while losing the opportunity to gain the other. To make decisions in economics, opportunity cost must be considered carefully and is thus often analyzed graphically. The production possibilities curve (or PPC) is one of the most widely used methods of analyzing opportunity cost in economics. Essentially, the production possibilities curve shows the relationship between two options (one on the x-axis, the other on the y-axis) and how the opportunity cost of obtaining one over the other changes. Let's use the table from the last lesson, in which a business known as Super Snacks can either produce tacos or burritos when using all of their resources. This table shows how different amounts of t

Unit 1, Lesson 2: Opportunity Costs and Trade-Offs

This lesson on opportunity cost will be on the Basic Economic Concepts portion of the AP examination(s). Trade-offs are something which we have all experienced before. When you make a choice between two options, you experience a trade-off . For example, if someone offered you either an apple or a banana, you must make a trade-off ; a choice in which you gain one thing while losing the option to gain the other. So let's say you choose the banana. In this case, your opportunity cost was the apple. In essence, your opportunity cost is the next best alternative when you make a decision involving a trade-off. The application of this concept is extremely important in economics, because it allows companies and even entire countries to make decisions involving production. However, the situations aren't as simple as deciding between an apple or a banana. Instead, they are more complex and involve tables and graphs. In this lesson, we will be using tables to explore op

Unit 1, Lesson 1: Scarcity

This lesson on scarcity will be on the Basic Economic Concepts portion of the AP examination(s). The idea of scarcity is simple: the Earth has a finite number of resources, but humans have an infinite number of wants. To make it even simpler, we want it all but can't have it all. The reason we learn this concept is because it is fundamental to the science of economics. Economics is essentially the science of decision-making given scarcity. Because we have a finite number of resources, we have to make key decisions about what to do with these resources. As we explore opportunity cost in the next lesson, we will delve deeper into that process and thus, further into economics as a whole. However, let's focus on scarcity for now. For something to be considered scarce, it has to be limited and desirable . Let's zoom in on these traits. Limited - For something to be limited means that there must be a finite amount of it. For example, if a clothing store sell