1. AP Microeconomics: An Introduction
Spring Semester 2019
Stater

2. The Economic Perspective
The SCARCITY of resources necessitates CHOICE
We can’t have it all.

3. What is economics?
“The social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants”
A society must ask itself how best to accomplish this
Not a natural science, but scientific method is used
Hypotheses, theories, models, generalizations

4. Microeconomics vs. Macroeconomics
Looks at the details of specific economic units
Studies an individual industry, firm, or household
“The trees”
Macro:
Examines the economy as a whole
Looks at collections of specific economic units
“The forest”

5. Positive vs. Normative Economics
Looks at desirability of certain aspects of the economy
Incorporates value judgments regarding policy actions
“What ought to be”
Positive:
Focuses on facts and descriptions
Avoids value-judgments
Science-based
“What is”

6. Assumptions of Economists
There is no such thing as a free lunch
(There is always some cost to society)
We have scarce resources and unlimited wants
Humans behave rationally, in their own self-interest
“Other things equal” : ceteris paribus

7. Utility = Satisfaction/Happiness
We are always looking to increase our utility
To do so, we must weigh the costs and benefits of decisions

8. Marginalism Marginal = extra, additional
Marginal Benefit (MB) = the additional benefit of consuming one more of something
Marginal Cost (MC)= the additional cost of producing one more of something
You can have “too much” of a good thing

9. Tradeoffs & Opportunity Costs
What you sacrifice in order to achieve or gain something else (what were the alternatives?)
Opportunity Cost
The value of the next best alternative (what was the given up alternative worth?)
Not necessarily measured in $$$
Or…

10. Real-world application
What were some tradeoffs of your decision to come to school today? What was the opportunity cost?
What were some tradeoffs of your decision to attend high school at Douglas Anderson? The opportunity cost?

11. Classwork: Writing Assignment
Reflect on and write about the following questions:
Have you already made a decision regarding what you will do after high school? If so, what have you decided, and what are the benefits and costs of your decision? What are the alternatives, and what is the opportunity cost (value of the next best alternative)?
If you haven’t decided, pick a potential choice and discuss the benefits, costs, alternatives, and opportunity cost of this choice.
Due next class
May be handwritten or typed
Be thorough and thoughtful
Aim for at least a page