ACDC Econ Lecture Summary

Introduction

• Host: Jacob Clifford
• Video intended for AP or college introductory microeconomics course review.
• Not a detailed reteaching, but a quick prep for exams.
• Encourages purchase of the "Ultimate Review Pack" for detailed learning materials.

Basic Economic Concepts

Scarcity and Opportunity Costs

• Scarcity: Unlimited wants, limited resources.
• Opportunity Costs: The cost of forgoing the next best alternative when making a decision.

Production Possibilities Curve (PPC)

• Shows combinations of two goods with full resource efficiency.
• Points on the curve: Efficient.
• Points inside: Inefficient.
• Points outside: Impossible with current resources.
• Shapes:
  • Straight line: Constant opportunity cost.
  • Bowed out: Increasing opportunity cost.

Shifts in PPC

• Caused by changes in resources, technology, or trade.
• Trade allows consumption beyond current production capabilities.

Comparative and Absolute Advantage

• Comparative Advantage: Specialization in goods with lower opportunity costs.
• Absolute Advantage: Producing more of a good with the same resources.
• Terms of Trade: Agreement on exchange rates of goods between countries.

Economic Systems

• Free Market (Capitalism), Command Economy, Mixed Economy.
• Circular Flow Model: Interaction between businesses, individuals, and government.
• Concepts: Transfer payments, subsidies, and factor payments.

Unit 1: Introduction to Economics

• Difficulty: 3/10.
• Focuses on basic concepts like scarcity, opportunity costs, comparative advantage.

Unit 2: Demand and Supply

Demand and Supply

• Law of Demand: Inverse relationship between price and quantity demanded.
• Law of Supply: Direct relationship between price and quantity supplied.
• Equilibrium: Intersection of demand and supply.

Shifts and Effects

• Demand and supply can shift leading to changes in equilibrium.
• Double shifts (both curves shift) lead to indeterminate changes in price or quantity.

Elasticity

• Elasticity: Sensitivity of quantity demanded or supplied to price changes.
• Types: Elastic, inelastic, and unitary elasticity.
• Coefficients: Demand, income, and cross-price elasticity coefficients.
  • Cross-price: Substitutes (positive) or complements (negative).
  • Income: Normal (positive) or inferior goods (negative).

Price Controls

• Price ceilings: Set below equilibrium, causing shortages.
• Price floors: Set above equilibrium, causing surpluses.

Surplus and Deadweight Loss

• Consumer Surplus: Difference between willingness to pay and actual price.
• Producer Surplus: Difference between price received and willingness to sell.
• Deadweight Loss: Loss of efficiency due to market distortions.

Taxes and Trade

• Taxes: Affect supply curves, with incidence depending on elasticity.
• International Trade: Affects consumer and producer surplus.
• Tariffs: Create deadweight loss.

Unit 3: Costs and the Theory of the Firm

Cost Curves

• Types of Costs: Fixed, variable, total costs.
• Per Unit Costs: Average total, variable, and fixed costs; marginal cost.

Short Run vs Long Run

• Short Run: Some resources are fixed.
• Long Run: All resources are variable; characterized by economies and diseconomies of scale.

Theory of the Firm

• Perfect Competition: Many firms, identical products, price takers.
• Profit Maximization: Produce where MR = MC.
• Efficiency: Productive (lowest ATC) and allocative (MC = Demand) efficiency.

Unit 4: Market Structures

Market Structures

• Perfect Competition, Monopolies, Oligopolies, Monopolistic Competition.

Monopoly

• Single firm, high barriers, price makers.
• Graphical representation: Downward sloping demand and MR curves.
• Regulation: Socially optimal and fair return pricing.
• Price Discrimination: Charging different prices, eliminating consumer surplus.

Oligopoly

• Few firms, strategic pricing, game theory, and Nash equilibrium.

Monopolistic Competition

• Characteristics of monopoly and perfect competition.
• Long run equilibrium: Firms enter/exit, affecting demand.

Unit 5: Resource Markets

Labor Markets

• Derived Demand: Demand for labor depends on product demand.
• Minimum Wage: Binding price floor, potential for unemployment.
• MRP (Marginal Revenue Product) and MRC (Marginal Resource Cost): Determine hiring decisions.

Monopsony

• Single buyer in a labor market.
• Upward sloping supply and MRC curve.

Least-Cost Rule

• Allocating resources to minimize cost based on marginal product per price.

Unit 6: Market Failures

Market Failures

• Public Goods: Non-rivalrous, non-excludable.
• Externalities: Negative (additional costs) and positive (additional benefits) externalities.

Income Inequality

• Lorenz Curve: Distribution of income.
• Gini Coefficient: Measure of income inequality.

Types of Taxes

• Progressive, regressive, and proportional taxes.

Conclusion

• Review and practice all units, especially complex concepts in units 3 and 4.
• Best of luck on exams!