The AP Microeconomics and Macroeconomics Tests 2/3 Multiple Choice 2/3 Multiple Choice 1/3 Free Response 1/3 Free Response

Micro in a Nutshell! Basic Microeconomic Concepts (8-14%): Basic Microeconomic Concepts (8-14%): Scarcity, choice, and opportunity cost Scarcity, choice, and opportunity cost Production possibilities curve Production possibilities curve Comparative advantage, specialization, and exchange Comparative advantage, specialization, and exchange

Economics! “The study of how human beings coordinate their wants and desire, given the decision-making mechanisms, social customs, and political realities of the society” “The study of how human beings coordinate their wants and desire, given the decision-making mechanisms, social customs, and political realities of the society” What, and how much, to produce What, and how much, to produce How to produce it How to produce it For whom to produce it For whom to produce it

Everything Has a Cost “No such thing as a free lunch” “No such thing as a free lunch” Opportunity cost- what must be sacrificed to obtain something Opportunity cost- what must be sacrificed to obtain something

People choose for good reasons Normative Economics- Value Judgments (opinions); how things ought to be Normative Economics- Value Judgments (opinions); how things ought to be Positive Economics- Scientific Method Positive Economics- Scientific Method Ex. Is it better for society to spend money providing more federal financial college aid or to save the whales???????? Ex. Is it better for society to spend money providing more federal financial college aid or to save the whales????????

Incentives matter! People create economic systems to influence choices and incentives (ex. “Cash for Clunkers”) People create economic systems to influence choices and incentives (ex. “Cash for Clunkers”)

People Gain From Voluntary Trade

Economic Thinking is Marginal Thinking Marginal choices involve the effects of additions and subtractions from current conditions. Marginal choices involve the effects of additions and subtractions from current conditions.

The Value of a Good or Service is Affected by People’s Choices

Economic Actions Create Secondary Effects

College Board wants you to be able to answer: 1.Scarcity is correctly described by which of the following statements? 1.Scarcity is correctly described by which of the following statements? I. Scarcity exists if there are more uses for resources than can be satisfied at one time. I. Scarcity exists if there are more uses for resources than can be satisfied at one time. II. Scarcity exists if decisions must be made about alternative uses for resources. II. Scarcity exists if decisions must be made about alternative uses for resources. III. Scarcity would not exist in a society in which people wanted to help others instead of themselves. III. Scarcity would not exist in a society in which people wanted to help others instead of themselves. A.I only B.II only C.III only E.I, II, and III A.I only B.II only C.III only D.I and II only E.I, II, and III