ACDC Economics by Jacob Clifford: Introductory Microeconomics Summary

Introduction

• Designed for quick review before AP test or college final in Microeconomics.
• Not a comprehensive re-teaching but a summary.
• Encourages purchasing the Ultimate Review Pack for practice questions and detailed videos.

Basic Economic Concepts

Scarcity and Opportunity Cost

• Scarcity: Unlimited wants, limited resources.
• Opportunity Costs: Choosing one option means forgoing another.

Production Possibilities Curve (PPC)

• Shows efficient, inefficient, and unattainable points.
• Straight Line PPC: Constant opportunity cost.
• Concave PPC: Increasing opportunity cost.
• Shifts due to changes in resources, technology, and trade.

Comparative Advantage

• Specialize in goods with lower opportunity costs.
• Absolute Advantage: Who can produce more.
• Terms of Trade: Mutually beneficial trade ratios.

Economic Systems

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

Supply and Demand

Demand

• Law of Demand: Price up, quantity demanded down.
• Downward sloping due to substitution, income effects, and diminishing marginal utility.

Supply

• Law of Supply: Price up, quantity supplied up.

Market Equilibrium

• Where supply equals demand.
• Price Changes: Move along curve, do not shift it.
• Shifts: Demand or supply increases/decreases.

Elasticity

• Measure of how quantity responds to price changes.
• Elastic: Sensitive to price changes.
• Inelastic: Not sensitive to price changes.
• Cross-Price Elasticity: Substitutes or complements.
• Income Elasticity: Normal or inferior goods.

Consumer Behavior and Surplus

Consumer and Producer Surplus

• Consumer Surplus: Willingness to pay minus actual price.
• Producer Surplus: Price received minus cost of production.

Price Controls

• Ceilings: Below equilibrium, cause shortages.
• Floors: Above equilibrium, cause surpluses.

Taxes and Tariffs

• Tax Incidence: Who bears the tax burden depends on elasticity.
• Tariffs: Lead to higher prices and deadweight loss.

Theory of the Firm

Production and Costs

• Short Run vs Long Run Costs
• Fixed, Variable, Total Costs
• Economies and Diseconomies of Scale

Market Structures

• Perfect Competition: Many firms, price takers.
• Monopolies: One firm, price makers.
• Monopolistic Competition: Many firms, differentiated products.
• Oligopolies: Few firms, interdependent.

Profit Maximization

• MR = MC Rule: To maximize profit.
• Shut Down Rule: Shut down if P < AVC.
• Efficiency: Allocative and productive.

Resource Markets

• Derived Demand: Demand for labor based on product demand.
• Minimum Wage: Binding price floor.
• Monopsony: Single buyer, similar to monopoly.

Market Failures

Public Goods

• Non-Rivalrous and Non-Excludable

Externalities

• Negative Externalities: Additional social costs.
• Positive Externalities: Additional social benefits.
• Government Interventions: Taxes and subsidies.

Income Distribution

• Lorenz Curve: Measure of income inequality.
• Types of Taxes: Progressive, regressive, proportional.

Conclusion

• Comprehensive review of Microeconomics topics.
• Encouragement to practice and utilize resources for exam success.