Shalom's AP Econ Blog

Unemployment:  failure to use available resources, particularly labor, to produce desired goods and services.  Population: the number of people in a country Labor Force: number of people in a country that are classified as employed or unemployed Employed: people who are 16 years of age or older who have a job; must work at least hour every two weeks; does not matter if it is full time or part-time Unemployed: people who are 16 years of age or older who do not have a job but they have actively searched for a job in the last two weeks Not in the Labor Force:  kids full-time students retirees the disabled the mentally institutionalized  the incarcerated the military  homemakers discouraged workers How to Calculate Unemployment Rate:  (number of unemployed/number of unemployed + number of employed) x 100 4 Types of Unemployment Frictional Unemployment: people are temporarily unemployed or in between jobs; these indiv...

Inflation: reduces the purchasing power of money Gas 1982: $0.60, Gas 2018: $2.75 when inflation occurs, each dollar of income will buy fewer goods than before 3 Causes of Inflation:  the government prints too much money; governments that keep printing money to pay debts end up with a condition called hyperinflation Demand-pull inflation: too many dollars chasing too few goods; demand pulls up prices Cost-push inflation: higher production cost increases prices Unanticipated inflation:  Hurt by Inflation:  Lendors/Predators - locked into a fixed interest rate People on a fixed income  Savers COLA = Cost of Living Adjustment  Helped by Inflation:  Debtors/Borrowers Flexible Income A business where the price of the product increases faster than the price of resources  Nominal Interest Rate: the unadjusted cost of borrowing or lending money Real Interest Rate: the cost of borrowing or lending money that is ...

GDP (Gross Domestic Product): the total market value of all final goods and services produced within a country's borders within a given year. i.e an American working within the US is on the US' GDP formula: GDP = C + Ig + G + Xn (expenditure approach) C: personal consumption expenditure - finished durable and non-durable goods (67% of the economy)  Ig: gross private domestic investment - new factory equipment, factory equipment maintenance, construction of housing, unsold inventory of products built in a year ( net private domestic investment + depreciation) G: government spending  Xn: net exports -  (Exports - Imports) Not Included in GDP:  used or secondhand goods (in an effort to avoid double counting) gifts; transfer payments: no output is produced, recipients contribute nothing to current production (public: welfare, social security; private: scholarships) stocks and bonds (purely financial transactions) unreported busin...

Household: a person or a group of people who share an income. sell resources buy products Firm: an organization that produces goods and services for sale. they buy resources and sell products Factor (Resource) Market: the market in which the factors of production are bought by firms and sold by households. firms buy, households sell Product Market: where goods and services are bought and sold. firms sell, households buy Factor Payments Land - Rents Labor - Wages Capital - Interests Entrepreneurship - Profits

Price Ceiling: A legal max price meant to help buyers; it keeps the price from getting too high Lower prices for some consumers Shortage Long lines for buyers Illegal sales above the equilibrium price Price Floor: The legal minimum price that is meant to help the seller; it keeps product prices from falling Higher product prices Surplus Higher taxes Waste Business Cycle: the fluctuation in economic activity that an economy experiences over a period of time GDP (Gross Domestic Product) measures a country's standard of living An average business cycle is 5 to 7 years Expansion: a period where you experience high/real GDP and high employment Peak: the highest point just before the unemployment rate rises  Contraction/Recession: real GDP decreases and unemployment is high; lasts about 14 months; if a recession loses more than 10% of real GDP, then it's a depression. Trough/Depression: lowest point; troughs are meaningless because we never ...

Shalom Akinwunmi AP Economics 3rd Period Supply: the quantities that producers or sellers are willing and able to produce or sell at various prices The Law of Supply: There is a direct relationship between price and quantity supply What Causes a Change in the Quantity of Supply? Δ in price What Causes a Change in Supply? Δ In the number of sellers (producers/suppliers) In the cost of production (resource prices) In technology In the weather In taxes and subsidies In expectations Total revenue formula: Price x Quantity Fixed cost: a cost that does not change no matter how much of a good is being produced Variable cost: a cost that rises and falls depending upon how much is produced Marginal cost: the cost of producing one more additional unit of a good Marginal Revenue: New total revenue - old marginal revenue Important Formulas (Q: Quantity; TC: Total Cost; TFC: Total Fixed Cost; TVC: Total Variable Cost; MC: Marginal Cost; AFC: A...

Shalom Akinwunmi AP Economics 3rd Period Demand: the quantities that people are willing and able to buy at various prices Downward sloping The Law of Demand: There is an inverse relationship between price and quantity demand Change in quantity is determined by Δ in price What Causes a Change in Quantity Demanded? Δ in price What Causes Change in Demand? Δ In buyer’s taste In the number of buyers In income (normal goods, inferior goods) In price related goods (substitute goods, complementary goods) Normal goods: goods that buyers buy more of when their income rises Inferior goods: goods that buyers buy less of when their income rises Substitute goods: goods that serve roughly the same purpose Coke and Pepsi Butter and margarine Complementary goods: goods that are often consumed together Burger and fries Elasticity of Demand: a measure of how consumers react to a change in price. Elastic Demand: demand tha...

Shalom Akinwunmi AP Economics 3rd Period Factors of Production Land: Natural resources Labor: Work exerted Capital - Human Capital: The knowledge and skills a worker gains through education and experience Physical Capital: Human made objects used to create other goods and services (tools, machinery) Entrepreneurship: Risk takers who are innovative Production Possibility Graphs (PPG, PPC, or PPF): Shows alternative ways to use resources Each point on the graph shows trade-off Shows the most that society can produce if it uses every available resource to the best of its ability Key Assumptions Full employment: 80-90% factory capacity; 4-5% unemployment Productive efficiency: Fixed resources: land, labor, and capital Fixed state of technology No international trade Two goods produced 3 Movements of the PPG Inside of the Curve Underemployment Unemployment Recession War Natural Disaster Famine ...

Shalom Akinwunmi AP Economics 3rd Period Economics: The branch of knowledge concerned with the production, consumption, and transfer of wealth Macroeconomics: Looking at the whole economy Microeconomics: Looking at a small segment of the economy i.e. supply and demand                                               Positive Economics: Claims that attempt to describe the world as is. It is very descriptive. Ex: Minimum wage laws cause unemployment. Increasing minimum wage means laying people off. Normative Economics: Claims that attempt to prescribe how the world should be. Ex: The government should raise the minimum wage. Wants: Desires of the citizens Wants are always broader than needs Needs: Basic requirements for survival Scarcity: Society has insufficient productive resources to fulfill all human wants and nee...