1 AP Microeconomics Final ReviewFall 2014

2 Principles of EconomicsTopics: Scarcity Economic Reasoning Positive vs. Normative Three Economic Questions PPF or PPC Absolute and Comparative Advantage Productive and Allocative efficiency

3 Principles of EconomicsWhat gave you problems Payments for factors Capital gets interest Labor gets wages Land gets rent Entrepreneurs get profit Productive efficiency It costs the least

4 Principles of EconomicsWhat 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

5 Supply and Demand Topics Law of Demand Law of Supply EquilibriumDeterminants of Demand Law of Supply Determinants of Supply Equilibrium Surplus and Shortage Price Ceilings and Floors

6 Supply and Demand What gave you problems Demand vs, Quantity DemandedDeterminants of Demand Substitutes and Compliments

7 Elasticity and Consumer ChoiceTopics Marginal Utility Price elasticity of demand Elasticity and total revenue Cross Elasticities Normal vs. Inferior Goods Price Elasticity of Supply Tax and Elasticity

8 Elasticity and Consumer ChoiceWhat 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

9 Business Costs Topics Forms of BusinessTotal, marginal, average product Long run and short run Fixed and variable costs Economies and diseconomies of scale Total, average, marginal cost

10 Business Costs What caused you problems Forms of business ownershipNormal and economic profit Law of diminishing marginal return Relationship of marginal and average costs

11 Theory of the Firm Topics Profit maximization MR=MCShort run and long run equilibrium Government regulation Allocative and productive efficiency

12 Theory of the Firm What gave you problems:Demand curve for industry and firm Monopolistic competition Oligopoly Pure Competition Monopoly

13 Theory of the Firm Topics Quantity of LaborMarginal Product and Demand Marginal Productivity Theory Wages in Monopolistic and Competitive Markets Pure economic rent vs. quasi rent

14 Theory of the Firm What gave you problems Actions of Marginal ProductRise Fall Become negative Occupational licensing Inclusive Unionism

15 Public Choice Topics Economic function of government Economic RentTax Incidence

16 Public Choice What gave you problems: Definition of economic rentResults of raising and lowering interest rates Regressive tax

17 Extra Resources Videos Khan Academy