AP Macroeconomics Visuals Unit1
Production Possibilities Curve
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Production Possibilities Curve
Constant Opportunity Cost
Decreasing Opportunity Cost
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Absolute Advantage and
Comparative Advantage
•
ABSOLUTE ADVANTAGE
One individual or nation can produce more output with the same resources as another individual or nation.
•
COMPARATIVE ADVANTAGE
One individual or nation can produce a good at a lower opportunity cost than another
•
EXAMPLES OF COMPARATIVE ADVANTAGE
Economics professor and secretary
Auto mechanic and medical doctor
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Determining Comparative
Advantage (Output Method)
1.
Which nation has an absolute advantage in producing corn?
2.
Which nation has an absolute advantage in producing sunscreen? 3.
Which nation has a comparative advantage in producing corn? 4.
Which nation has a comparative advantage in producing sunscreen? 5.
Should Mexico specialize in corn or sunscreen?
6.
Should France specialize in corn or sunscreen?
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Movement Along a Demand Curve
As the price declines from P to P1, the quantity increases from
Q to Q1
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Shift in Demand
Factors that Shift Demand:
1.
Number of Consumers
2.
Price of complementary good
3.
Price of substitute good
4.
Consumer income
5.
Expectations about income or prices Increase in demand from D to D1 shows that at the same price
(P), the quantity increased from Q to Q1
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Movement Along a Supply Curve
As the price declines from P1 to P, the quantity decreases from
Q1 to Q.
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Production Possibilities Curve
Constant Opportunity Cost
Decreasing Opportunity Cost
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Absolute Advantage and
Comparative Advantage
•
ABSOLUTE ADVANTAGE
One individual or nation can produce more output with the same resources as another individual or nation.
•
COMPARATIVE ADVANTAGE
One individual or nation can produce a good at a lower opportunity cost than another
•
EXAMPLES OF COMPARATIVE ADVANTAGE
Economics professor and secretary
Auto mechanic and medical doctor
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Determining Comparative
Advantage (Output Method)
1.
Which nation has an absolute advantage in producing corn?
2.
Which nation has an absolute advantage in producing sunscreen? 3.
Which nation has a comparative advantage in producing corn? 4.
Which nation has a comparative advantage in producing sunscreen? 5.
Should Mexico specialize in corn or sunscreen?
6.
Should France specialize in corn or sunscreen?
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Movement Along a Demand Curve
As the price declines from P to P1, the quantity increases from
Q to Q1
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Shift in Demand
Factors that Shift Demand:
1.
Number of Consumers
2.
Price of complementary good
3.
Price of substitute good
4.
Consumer income
5.
Expectations about income or prices Increase in demand from D to D1 shows that at the same price
(P), the quantity increased from Q to Q1
Unit 1 : Macroeconomics
National Council on Economic Education
http://apeconomics.ncee.net
Movement Along a Supply Curve
As the price declines from P1 to P, the quantity decreases from
Q1 to Q.