ACDC Econ: Introductory Microeconomics Summary

Introduction

• Speaker: Jacob Clifford
• Purpose: Quick review for AP or college introductory microeconomics
• Not exhaustive reteaching; for quick prep before exams
• Mention of the Ultimate Review Pack with practice questions and videos

Key Economic Concepts

Scarcity and Opportunity Cost

• Scarcity: Unlimited wants, limited resources
• Opportunity Cost: Cost of next best alternative foregone

Production Possibilities Curve (PPC)

• Graph depicting combinations of two goods
• Efficiency: Points on curve
• Inefficiency: Points inside curve
• Impossible: Points outside curve
• Shapes:
  • Straight Line: Constant opportunity cost
  • Concave: Increasing opportunity cost
• Shifts due to changes in resources, technology, or trade

Comparative Advantage

• Specialization based on lower opportunity cost
• Absolute Advantage: Producing more of a good
• Terms of Trade: Beneficial exchange rate for both parties

Economic Systems

• Free Market System (Capitalism): Focused in class
• Command Economy
• Mixed Economy

Circular Flow Model

• Interaction between businesses, individuals, and government
• Product Market: Businesses sell products
• Resource Market: Businesses buy resources
• Transfer Payments: Govt payments not for exchange
• Subsidies: Govt payments to businesses

Unit 1

• Overview of basic economic concepts
• Difficulty: 3/10

Unit 2: Demand and Supply

Demand

• Law of Demand: Price ↑, Quantity Demanded ↓
• Downward sloping curve due to:
  • Substitution Effect
  • Income Effect
  • Diminishing Marginal Utility

Supply

• Law of Supply: Price ↑, Quantity Supplied ↑
• Equilibrium: Intersection of supply and demand
• Shift vs Movement along curves

Elasticity

• Elastic: Sensitive to price changes (elasticity > 1)
• Inelastic: Insensitive to price changes (elasticity < 1)
• Cross-Price Elasticity: Relationship between two goods
• Income Elasticity: Sensitivity to income changes

Total Revenue Test

• Helps determine elasticity of demand

Consumer and Producer Surplus

• Consumer Surplus: Difference between willing and actual pay
• Producer Surplus: Difference between actual price and cost

Price Controls

• Price Ceilings: Below equilibrium, causes shortages
• Price Floors: Above equilibrium, causes surpluses

International Trade

• World price affects domestic markets
• Tariffs: Government-imposed taxes on imports

Unit 3: Cost Curves and Theory of the Firm

Cost Concepts

• Fixed, Variable, and Total Costs
• Average and Marginal Costs

Cost Curves

• Short Run vs Long Run
• Economies and Diseconomies of Scale

Perfect Competition

• Many firms, identical products, no barriers
• MR=MC: Profit maximization rule

Long Run Equilibrium

• Normal Profit: Total revenue = total cost

Efficiency

• Productive Efficiency: Lowest cost production
• Allocative Efficiency: Quantity society desires

Unit 4: Market Structures

Monopoly

• Single firm, unique product, high barriers
• Natural Monopoly: Economies of scale
• Regulation: Government intervention

Oligopoly

• Few firms, high barriers, strategic pricing

Monopolistic Competition

• Many firms, differentiated products, low barriers

Unit 5: Resource Market

Labor Market

• Derived Demand: Demand for labor based on product demand
• Minimum Wage: Creates unemployment

Marginal Product and Resource Cost

• Calculating additional revenue from resources

Monopsony

• Single buyer, wage discrimination challenges

Least Cost Rule

• Optimizing resource combination for cost efficiency

Unit 6: Market Failures

Public Goods

• Non-Rivalry and Non-Exclusion: Free market failure

Externalities

• Negative Externalities: Additional social costs
• Positive Externalities: Additional social benefits

Lorenz Curve and Income Inequality

• Gini Coefficient: Measures income inequality

Types of Taxes

• Progressive: Higher income, higher tax rate
• Regressive: Lower income, higher tax rate
• Proportional: Same tax rate for all

Conclusion

• Encouragement for exam success
• Use of video as a review tool