AP Economics

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...

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...

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...