Macroeconomics Summer Reading
AP Macroeconomics Summer Reading
Chapter 1:
The two basic assumptions that economists make about individuals and firms are that individuals act to make themselves as well off as possible by maximizing their own utility (which makes them better off in the long run), and firms attempt to maximize profit by taking inputs and combining them in a way that adds value. Prices help measure how badly costumers want a product and how much labor producers are willing to endure to get a certain amount of money. When the price of a product falls, demand for it tends to increase, while when the price rises, it usually has a negative impact on demand. Contrarily, when the price rises, producers will work harder to obtain that product, while they will become less hopeful of a product with a low price.
Chapter 2:
Incentives give people a reason to do make a certain purchase or sell a certain product because they except to get a reward from it, which is positive because it’s a way to increase productivity or lessen things we don’t want. For example, although it could be considered morally wrong to kill rhinos, the market for the killing of black rhinos and selling of their horns is gradually expanding because it is in high demand, which gives poachers the incentive to hunt down even more black rhinos. A perverse incentive is an incentive that has negative effects, derived from something that was meant to be positive. A high school example of this is completing a paper because you have the incentive that you will get a high grade on it, only to receive a failing grade.
Chapter 3:
An externality means that the private cost of something is different from the social costs. For example, buying a specific car could mean higher payments, more expensive insurance, and more required gas— the private costs. However, purchasing that car could also be harmful to children and use too much carbon dioxide, thus harming the
Chapter 1:
The two basic assumptions that economists make about individuals and firms are that individuals act to make themselves as well off as possible by maximizing their own utility (which makes them better off in the long run), and firms attempt to maximize profit by taking inputs and combining them in a way that adds value. Prices help measure how badly costumers want a product and how much labor producers are willing to endure to get a certain amount of money. When the price of a product falls, demand for it tends to increase, while when the price rises, it usually has a negative impact on demand. Contrarily, when the price rises, producers will work harder to obtain that product, while they will become less hopeful of a product with a low price.
Chapter 2:
Incentives give people a reason to do make a certain purchase or sell a certain product because they except to get a reward from it, which is positive because it’s a way to increase productivity or lessen things we don’t want. For example, although it could be considered morally wrong to kill rhinos, the market for the killing of black rhinos and selling of their horns is gradually expanding because it is in high demand, which gives poachers the incentive to hunt down even more black rhinos. A perverse incentive is an incentive that has negative effects, derived from something that was meant to be positive. A high school example of this is completing a paper because you have the incentive that you will get a high grade on it, only to receive a failing grade.
Chapter 3:
An externality means that the private cost of something is different from the social costs. For example, buying a specific car could mean higher payments, more expensive insurance, and more required gas— the private costs. However, purchasing that car could also be harmful to children and use too much carbon dioxide, thus harming the