AP/College Microeconomics Review Lecture Summary

Introduction

• Presenter: Jacob Clifford from ACDC Econ
• Purpose: Quick review to prepare for AP test/final exam in microeconomics
• Encouragement to use the Ultimate Review Pack for more resources, practice questions, and videos

Unit 1: Basic Economic Concepts

• Scarcity & Opportunity Costs
  • Scarcity: Unlimited wants vs. limited resources
  • Opportunity Costs: Every choice has a cost
• Production Possibilities Curve (PPC)
  • Shows combinations of two goods
  • Efficient (on curve), Inefficient (inside curve), Impossible (outside curve)
  • Shapes: Straight line (constant opportunity cost), Bowed out (increasing opportunity cost)
  • Shifts due to: changes in resources, technology, or trade
• Comparative Advantage & Trade
  • Countries specialize in goods with lower opportunity costs
  • Differentiates between absolute advantage (output comparison) and comparative advantage (opportunity cost comparison)
• Economic Systems
  • Free market, command economy, mixed economy
  • Circular flow model
• Key Terms
  • Transfer payments, subsidies, factor payments

Unit 2: Supply and Demand

• Demand Curve
  • Downward sloping (law of demand)
  • Factors: substitution effect, income effect, diminishing marginal utility
• Supply Curve
  • Upward sloping (law of supply)
  • Price changes move along curves, do not shift them
• Equilibrium
  • Intersection of supply and demand
  • Shortages and surpluses
• Shifts in Curves
  • Demand can increase/decrease
  • Supply can increase/decrease
  • Double shifts lead to indeterminate outcomes
• Elasticity
  • Elastic vs. Inelastic demand
  • Elasticity coefficients for demand, cross-price, and income
  • Total revenue test (applies to demand)
• Consumer and Producer Surplus
  • Competitive markets maximize surplus
  • Deadweight loss from inefficiencies like price controls

Unit 3: Cost Curves & Theory of the Firm

• Production & Costs
  • Inputs, outputs, marginal product
  • Law of Diminishing Marginal Returns
  • Types of costs (fixed, variable, total)
• Cost Curves
  • Short run vs. long run costs
  • Economies and diseconomies of scale
• Perfect Competition
  • Price takers, identical products, low entry barriers
  • Profit maximization where MR = MC
  • Long-run equilibrium: no economic profit
• Efficiency
  • Productive and allocative efficiency

Unit 4: Market Structures

• Monopoly
  • Single firm, high barriers
  • Price maker, downward sloping demand
  • Profit maximization, natural monopolies, regulation
  • Consumer surplus and deadweight loss
• Price Discrimination
  • Different prices to maximize profit
• Oligopoly
  • Few firms, strategic pricing
  • Game theory, Nash equilibrium
• Monopolistic Competition
  • Many firms, differentiated products
  • Long-run equilibrium: normal profit

Unit 5: Resource Markets

• Supply and Demand for Labor
  • Derived demand concept
  • Minimum wage as a price floor
• Marginal Revenue Product (MRP) and Marginal Resource Cost (MRC)
  • Perfectly competitive resource market
• Monopsony
  • Single buyer in labor market
• Least-Cost Rule
  • Optimal mix of inputs

Unit 6: Market Failures

• Public Goods
  • Shared consumption, non-excludable
• Externalities
  • Negative vs. positive externalities
  • Deadweight loss, government intervention
• Lorenz Curve & Income Inequality
  • Measuring income distribution
• Types of Taxes
  • Progressive, regressive, proportional

Conclusion

• Encouragement for exam preparation
• Reminder of available resources such as videos and review packs

These notes provide a comprehensive overview of the key topics and concepts covered in an AP/College introductory microeconomics course. Focus on understanding each unit, practicing the graphs and equations, and reviewing resources for a thorough grasp of microeconomics fundamentals.