the first lesson of economics is scarcity: there is never enough of anything to fully satisfy all...

The first lesson of economics is scarcity:

there is never enough of anything to fully satisfy all

those who want it. The first lesson of politics is to disregard the first lesson

of economics. -Thomas Sowell

Economic Basic TermsModules 1-3

AP Microeconomics

“Then you should say what you mean,” the March Hare went on.“I do,” Alice hastily replied; “at least I mean what I say – that’s the same thing you know.”“Not the same thing a bit!” said the Hatter.“Why, you might just as well say that ‘I see what I eat’ is the same thing as ‘I eat what I see!’”

- Lewis Carroll, Alice in Wonderland, 1865

Basics… misc. terms• Goods & Services• Inputs and Outputs• Stock and Flow

Basics 1: The study of…

• Economics–Micro versus Macro

• Theories & Models– Scientific Method– Economic Principle (predicts probable

behavior)–Ceteris paribus

• Positive versus Normative

Basics 2: Limits & Alternatives

• Scarcity• Opportunity Cost• Utility• Incentive• Marginal Analysis– MB– MC– Rational Choice

• Three Economic Questions:1.What2.How3.For Whom

Basics 3: Factors of Production & WIRP

• Factors of Production–Labor, Capital, Land, Entrepreneurship

• WIRP (factor payments)–Wages, Interest, Rent, Profit

Basics 4: Macro basics

• Circular Flow• Business Cycle• Unemployment, GDP, and Inflation• Standard of Living• Economic Growth