Definition Of Scarcity
- Unlimited human wants and needs vs. limited resources
- The fundamental economic problem that all societies face
- Resources include land, labor, capital, and entrepreneurship
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AP Microeconomics
Microeconomics
AP Microeconomics Complete Notes
Exam: 2 hours 10 minutes - 60 MCQ (70 min, 66.6%) + 3 FRQ (60 min, 33.3%) Calculator: Not allowed Scope: AP Microeconomics
| Section | Format | Questions | Time | Weight |
|---|---|---|---|---|
| Section I | Multiple Choice (MCQ) | 60 | 70 min | 66.6% |
| Section II | Free Response (FRQ) | 3 | 60 min | 33.3% |
FRQ Structure
| Question | Content | Points |
|---|---|---|
| Q1 | Long FRQ (10 points): Must include graph + calculation + explanation | 10 pts |
| Q2 | Short FRQ (5 points): Concept application | 5 pts |
| Q3 | Short FRQ (5 points): Graph analysis | 5 pts |
FRQ Tips
- Always draw and label graphs - even partial credit depends on it
- Use proper economic terminology (not casual language)
- Show all work for calculations
- Answer in complete sentences; connect each step to the economic concept
Unit 1: Basic Economic Concepts
Factors Of Production / Resources
- Land: Natural resources (water, minerals, timber, oil, forests)
- Labor: Human effort, physical and mental, used in production
- Capital: Physical tools, machinery, buildings, equipment used to produce goods and services
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Practice
Unit 2: Supply and Demand
Law Of Demand
- Ceteris paribus, as price increases, quantity demanded decreases (negative relationship)
- Inverse relationship between price and quantity demanded
- Higher price reduces quantity demanded through:
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Practice
Demand Curve
- Graphical representation of law of demand
- Downward sloping (negative slope)
- Price on vertical axis, quantity demanded on horizontal axis
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Practice
Unit 3: Production Cost and the Perfect Competition Model
Total Product Tp
- Total output produced using a given amount of variable input (labor)
- Increases with labor input but at a decreasing rate
- Initially increases at increasing rate, then decreasing rate
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Practice
Marginal Product Mp
- Additional output from one more unit of labor
- Measures productivity of each additional worker
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Practice
Unit 4: Imperfect Competition
Comparison Of Market Structures
| Feature | Perfect Competition | Monopolistic Competition | Oligopoly | Monopoly |
|---|---|---|---|---|
| Number of firms | Very many | Many | Few | One |
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Practice
Barriers To Entry
- Resource control: Single firm owns key resource (e.g., De Beers diamonds)
- Economies of scale: Natural monopoly (LRAC declines over entire market output)
- Government grants: Patents, copyrights, franchises, licenses
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Practice
Unit 5: Factor Markets
Factors Of Production
Labor, Capital, Land, Entrepreneurship
Practice
Derived Demand
Demand for factors derived from demand for the product
- Marginal Resource Cost MRC/MFC
Practice
Unit 6: Market Failure and the Role of Government
Marginal Social Benefit Msb
Land:
- Supply perfectly inelastic (vertical line)
- Economic Rent: Payment above minimum needed to keep factor in current use
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Practice
Marginal Social Cost Msc
Land:
- Supply perfectly inelastic (vertical line)
- Economic Rent: Payment above minimum needed to keep factor in current use
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Practice