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AP Microeconomics Final Review Fall 2014 Principles of Economics • Topics: – Scarcity – Economic Reasoning – Positive vs. Normative – Three Economic Questions – PPF or PPC – Absolute and Comparative Advantage – Productive and Allocative efficiency Principles of Economics • What gave you problems – Payments for factors • • • • Capital gets interest Labor gets wages Land gets rent Entrepreneurs get profit – Productive efficiency • It costs the least Principles of Economics • What gave you problems continued: – Allocative efficiency • Produce most wanted products – Allocative and Productive • Occur together at full production – Best place to operate on the PPC • Depends on what society wants Supply and Demand • Topics – Law of Demand • Determinants of Demand – Law of Supply • Determinants of Supply – Equilibrium – Surplus and Shortage – Price Ceilings and Floors Supply and Demand • What gave you problems – Demand vs, Quantity Demanded – Determinants of Demand • Substitutes and Compliments Elasticity and Consumer Choice • Topics – Marginal Utility – Price elasticity of demand – Elasticity and total revenue – Cross Elasticities – Normal vs. Inferior Goods – Price Elasticity of Supply – Tax and Elasticity Elasticity and Consumer Choice • What gave you trouble: – Law of diminishing marginal utility – Inelastic supply – Elasticity of supply in the long run and the short run – Zero cross elasticity – Price floors and surplus – Price ceilings and shortages Business Costs • Topics – Forms of Business – Total, marginal, average product – Long run and short run – Fixed and variable costs – Economies and diseconomies of scale – Total, average, marginal cost Business Costs • What caused you problems – Forms of business ownership – Normal and economic profit – Law of diminishing marginal return – Relationship of marginal and average costs Theory of the Firm • Topics – Profit maximization – MR=MC – Short run and long run equilibrium – Government regulation – Allocative and productive efficiency Theory of the Firm • What gave you problems: – Demand curve for industry and firm – Monopolistic competition – Oligopoly – Pure Competition – Monopoly Theory of the Firm • Topics – Quantity of Labor – Marginal Product and Demand – Marginal Productivity Theory – Wages in Monopolistic and Competitive Markets – Pure economic rent vs. quasi rent Theory of the Firm • What gave you problems – Actions of Marginal Product • Rise • Fall • Become negative – Occupational licensing – Inclusive Unionism Public Choice • Topics – Economic function of government – Economic Rent – Tax Incidence Public Choice • What gave you problems: – Definition of economic rent – Results of raising and lowering interest rates – Regressive tax Extra Resources • Videos • Khan Academy
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