Economics Reading

Welcome to ACDC Econ with Jacob Clifford. This summary is designed as a quick review to prepare for your AP or college introductory microeconomics exam. Here's a breakdown of key concepts covered:

Introductory Economics Concepts

• Scarcity: Unlimited wants vs limited resources.
• Opportunity Cost: Every decision has a cost; what you give up to produce or choose something else.
• Production Possibilities Curve (PPC):
  • Efficient: Points on the curve.
  • Inefficient: Points inside the curve.
  • Impossible: Points outside the curve.
  • Constant Opportunity Cost: Straight line PPC.
  • Increasing Opportunity Cost: Bowed out PPC.
  • Shifts in PPC: Due to changes in resources, technology, or trade.
• Comparative and Absolute Advantage:
  • Comparative Advantage: Lower opportunity cost specialization.
  • Absolute Advantage: Who can produce more.
  • Terms of Trade: Beneficial trade ratios for both countries.
• Economic Systems: Free market, command economy, and mixed economy.
• Circular Flow Model: Interaction of businesses, individuals, and government.
• Key Terms: Transfer payments, subsidies, factor payments.

Unit 1: Basic Economic Concepts

• Difficulty: 3/10
• Key Concepts: Scarcity, PPC, comparative advantage.

Unit 2: Supply and Demand

• Demand: Downward sloping; price and quantity demanded.
• Supply: Relationship between price and quantity supplied.
• Equilibrium: Intersection of supply and demand.
• Shifts in Curves: Demand or supply increase or decrease.
• Elasticity:
  • Price Elasticity of Demand: Sensitive or insensitive to price changes.
  • Cross-Price Elasticity: Substitutes and complements.
  • Income Elasticity: Normal vs inferior goods.
  • Total Revenue Test: Relation to elasticity.
• Consumer and Producer Surplus: Efficiency, deadweight loss.
• Price Controls: Ceilings and floors impact on surplus and loss.
• International Trade: Impact on surplus with world prices.
• Taxes and Tariffs: Impact on supply curve, tax burdens.
• Consumer Choice: Utility maximization.
• Difficulty: 5/10

Unit 3: Theory of the Firm

• Cost Curves: Fixed, variable, total, and marginal costs.
• Short-Run vs Long-Run Costs: Economies and diseconomies of scale.
• Perfect Competition:
  • Characteristics: Many firms, identical products.
  • Profit Maximization: MR=MC.
  • Long-Run Equilibrium: Normal profit.
  • Efficiency: Productive and allocative.
• Difficulty: 9/10

Unit 4: Market Structures

• Monopolies:
  • Characteristics: One firm, price maker.
  • Natural Monopoly: Regulation, socially optimal.
  • Price Discrimination: Multiple pricing, elimination of consumer surplus.
• Oligopoly: Strategic pricing, game theory, Nash equilibrium.
• Monopolistic Competition: Hybrid characteristics, long-run equilibrium.
• Difficulty: 8/10

Unit 5: Resource Market

• Derived Demand: Labor demand based on product demand.
• Minimum Wage: Binding floor impacts.
• MRP and MRC: Marginal revenue product and marginal resource cost.
• Monopsony: Monopoly in labor.
• Least Cost Rule: Optimal input combination.
• Difficulty: 6/10

Unit 6: Market Failures

• Public Goods: Non-rivalry and non-exclusion.
• Externalities:
  • Negative: Additional social costs.
  • Positive: Additional social benefits.
  • Solutions: Taxes and subsidies.
• Income Inequality: Lorenz curve, Gini coefficient.
• Types of Taxes: Progressive, regressive, proportional.
• Difficulty: 4/10

Good luck on your exams! Review these key concepts and practice applying them through questions and exercises to solidify your understanding.