AP Economics Notes

Ap Economics

1-6-16

Factors of production-resources required to produce goods and services. 

-physical capital-tools, machines, fActories, robots etc

-human capital-knowledge, skill, ability and talents gained through education and work experience 

-tradeoffs-alternatives that we give up when we choose one course of action over the other. 

-Opportunity cost-next best alternative 

-production possibility graphs-alternative ways to use and economy's resources. (Ppg,ppf,ppc)

4 assumption of ppg 

1.two goods

2. Fixed resources (land,labor,capital,enterpenuership)

3.fixed technology 

4.full employment of resources 

Efficiency-using resources in such a way as to maximize production of goods and services 

Allocative Efficiency-products being produced are those most required by society 

Productive efficiency-products are being produced in the least costly way. Any point on ppc 

Underutilization-using fewer resources than an economy is capable of using

3 types of movement that occur within the ppc 

1.inside the curve, resources are unemployed or underemployed no productive efficiency 

2.along the ppc, move form B to C or C to B

3.shifts of the ppc,can shift out or in 

https://www.youtube.com/watch?v=g9aDizJpd_s <------------open video for more information

Jan.7-2016

What causes ppc to shift

1.technological changes 

2.economic growth 

3.change in resources 

4.change in labor force

5.natural disasters/war/famine

6.education/training(human capital)

Jan.21 

1.Peak-highest point of GDP. Greatest spending and lowest unemployment in this phase inflation becomes a problem.  

2.Expansion/ recovery stage- real GDP is increasing due to increase in spending and decrease in unemployment 

3. Contraction/Recession-real GDP declines for 6 months due to reduction in spending and increase in unemployment

4.Trough-lowest point of real GDP least amount of spending and highest unemployment.