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AP Macroeconomics 1-8-13

This overview of macroeconomics explores the fundamental concepts of scarcity and shortage. Scarcity indicates the limited availability of physical goods, necessitating choices and trade-offs, encapsulated in the concept of opportunity cost. In contrast, a shortage occurs when supply cannot meet demand at a given price, underpinned by factors such as war or disasters. We delve into macroeconomic components—households, government, and businesses—and how they impact the economy, leading to the calculation of Gross Domestic Product (GDP). Discover the essential factors of production and their role in economic processes.

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AP Macroeconomics 1-8-13

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  1. AP Macroeconomics1-8-13

  2. Scarcity vs. Shortage • Economics—the study of how people seek to satisfy needs and wants by making choices. • We need to make choices in life because every physical thing in this world is scarce. • There are limited quantities of EVERYTHING. • There are limited quantities of what can be produced, therefore we must choose.

  3. Scarcity v. Shortage • Scarcity—the idea that there are limited quantities of all physical matter on Earth • When you make a decision to do something you have to give up something else. • What you give up is Opportunity Cost. This is the heart of Economics. (more on this later). • Shortageoccurs when merchants can’t or won’t offer enough of a product at a certain price. • Wartime, natural disasters, holiday season. You could say life is economics and economics is life because everything is scarce.

  4. Branches of Economics • Macroeconomics—Looks at either the whole economy or one of its components • Component—small units lumped together to form one collection • The components are household, government, and business sectors (C, G, Ig, Xn)***** • We look at those components to see how they affect the entire economy • Unemployment, imports and exports

  5. C+Ig+G+Xn • C+Ig+G+Xn equals gross domestic product • Add up C, Ig, G, and Xn and you have GDP which is the value of all final goods and services produced in a country in a year

  6. Branches of Economics (cont) Microeconomics—study of small economic units: a particular industry, or firm, or group of households are studied

  7. The Factors of Production • Factors of Production—the resources that are used to make goods and services. • Land—natural resources • Labor—a person’s effort • Capital—any human made resource that is used to produce other goods/services • Physical Capital—eg. Tools, computers, machines, factories, etc. • Human Capital—eg. Training, experience, schooling. • Entrepreneurs—a person who assembles the factors of production to create goods & services

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