AP Economics Unit 1 Notes: Basic Economic Principles

These notes are based on Unit 1 of both AP Macroeconomics and AP Microeconomics; however, they can be used by anyone who wants to gain an understanding of basic economic principles. It defines multiple words, including opportunity cost, scarcity, the factors of production, efficiency, comparative advantage, absolute advantage, demand, supply, the law of demand, the law of supply, surplus, and shortage. The following charts are included: linear Production Possibilities Curve (PPC), concave PPC, convex PPC, market equilibrium, market surplus, market shortage, demand, supply, and increasing/decreasing demand/supply. There are explanations for what the 3 different types of PPCs mean in terms of opportunity cost, as well as explanations of fair terms of trade. Additionally, there are examples of comparative advantage and calculating opportunity cost for both input and output questions. All of the determinants of demand/supply are included and whether it causes demand/supply to increase or decrease.