AP Economics Mr. Crawford
MICROECONOMICS OBJECTIVES
The purpose of an AP course in Microeconomics is to give students a thorough understanding of the principles of economics that apply to the decisions of individuals--both consumers and producers--within the larger economic system. It places primary emphasis on the nature and functions of product markets, and includes the study of factor markets and the role of government in promoting greater efficiency and equity in the economy.

This portion of the AP Economics course will be divided into five units.


UNIT I: BASIC ECONOMIC CONCEPTS (5-7 days)  
The focus of this unit is scarcity. We will examine some methodological questions in economics, and cover such concepts as scarce resources, unlimited wants, and tradeoffs in decision-making. We will analyze the different economic systems--market, command and traditional--that have been used to answer the questions of what to produce, how to produce and for whom to produce. Finally, this unit will introduce the student to the economic way of thinking. This unit will make up 8-12% of the AP Exam.

OBJECTIVES

1. Describe and analyze the "economic way of thinking"
2. Describe the methodology used in economics
3. Graph and interpret data
4. Graph and distinguish between inverse, direct and zero relationships
5. Graph and distinguish between constant and variable relationships
6. Identify the conditions that give rise to the economic problem of scarcity
7. Define Opportunity Cost
8. Identify the Opportunity Costs involved in various courses of action
9. Construct a Production Possibilities curve from sets of hypothetical data
10. Apply the concept of Opportunity Cost to a Production Possibilities Curve
11. Analyze the significance of different locations on, above or below a Production Possibilities Curve
12. Identify the three economic questions every economic system must answer
13. Compare and contrast the economic philosophies of Adam Smith and Karl Marx
14. Describe and analyze the economic goals of different economic systems
15. Analyze the advantages and disadvantages of different economic systems 


UNIT II: SUPPLY AND DEMAND (15-20 days)  
The laws of Supply and Demand are the absolute fundamentals of economics; as President John F. Kennedy once said: "Teach a parrot to say 'supply and demand' and you'll have an economist." Supply and Demand are tools for understanding a wide variety of specific issues as well as the operation of the entire economic system. In this unit, we will learn that Supply and Demand curves are models for human behavior, and we will learn to analyze the determinants of Supply and Demand and the ways in which changes in these determinants affect Supply and Demand curves. Emphasis will be placed on the process by which equilibrium price and quantity are determined and the impact of government policies such as price floors, taxes, tariffs and quotas. In particular it is important to be able to make the distinction between movements along the curves and shifts in the curves themselves. This unit will make up 20-30% of the AP Exam.

OBJECTIVES

1. Describe the behavior of buyers and sellers in a competitive marketplace
2. List and explain the determinants of Demand
3. List and explain the determinants of Supply
4. Define and distinguish between the Income and Substitution effects
5. Define Diminishing Marginal Utility and explain how the Law of Diminishing Marginal Utility affects a downward sloping Demand curve
6.Draw a graph of a Supply and Demand schedule from data
7. Define Equilibrium
8. Determine what Equilibrium price and quantity will be when given the Demand and Supply data for a good
9. Differentiate between a "change in demand" and a "change in quantity demanded"
10. Differentiate between a "change in supply" and a "change in quantity supplied"
11. Analyze factors and situations that cause Supply and Demand curves to shift
12. Predict the effects of changes in the prices and quantities of Substitute and Complementary goods on the equilibrium price and quantity of a good
13. Explain shifts in the Supply and Demand curves based on changes in Supply and Demand
14. Define Price Elasticity of Demand
15. Distinguish between Elastic and Inelastic Demand
16. Explain the factors that tend to make Demand Elastic or Inelastic
17. Determine the Elasticity of a good at different prices based on changes in Total Revenue
18. Explain the factors that make a good Elastic or Inelastic
19. Define and distinguish between a Normal and an Inferior good
20. Define Price Ceilings and Price Floors
21. Graph Price ceilings and Price Floors
22. Analyze the effects of Price Ceilings and Price Floors on a competitive market
23. Define and describe the concepts of Surplus and Shortage and how they relate to Price Ceilings and Price Floors
24. Explain how markets allocate resources 


UNIT III: THE THEORY OF THE FIRM (20-25 days)  
The Theory of the Firm is the heart of a Microeconomics course. This material will be difficult because it is abstract, and it is important not to get bogged down in details and miss the major theoretical conclusions in this unit. We will learn to differentiate between short-run and long-run equilibria for both a profit-maximizing firm and for an industry, and to understand the relationships among price, marginal revenue, average revenue, marginal cost, average cost and profit. These concepts will be applied to the different types of competitive markets: perfect competition, monopolistic competition, oligopoly and monopoly. We will also evaluate government regulation of markets. This unit will make up 40-50% of the AP Exam.

OBJECTIVES

1. Distinguish between a fixed cost and a variable cost
2. Define and Graph total fixed cost, total variable cost, average fixed cost, average variable cost, average total cost and marginal cost
3. Define and plot total revenue, average revenue, marginal revenue and price
4. Define and identify profit, loss, the break-even point and the shutdown point
5. Distinguish between normal profit and economic profit
6. Distinguish between productive and allocative efficiency
7. Distinguish between the short-run and the long-run
8. Distinguish between an implicit and an explicit cost
9. State the Law of Diminishing Returns
10. Explain the Long-run average cost curve
11. Explain the profit-maximizing rule
12. List the characteristics of a Perfectly Competitive, Monopolistically Competitive, Oligopolistic and Monopolistic market
13. Graph a Perfectly Competitive, Monopolistically Competitive, Oligopolistic and Monopolistic market
14. Distinguish between a Perfectly Competitive, Monopolistically Competitive, Oligopolistic and Monopolistic market
15. Define the Concentration ratio
16. Describe the effects of different markets on the price of a product, the quantity of a product, the allocation of society's resources, the distribution of income and the rate of technological progress
17. Distinguish between homogenous and differentiated Oligopoly
18. Define collusion and list the advantages and disadvantages of collusion
19. Describe the Prisoner's Dilemma
20. Describe different types of non-price competition
21. Explain the theory of the regulated market place
22. Identify the socially optimal and fair return price for a regulated monopoly
23. Compare perfect competition and imperfect competition 


UNIT IV: FACTOR MARKETS (7-10 days)  
The basic analytical framework in examining factor markets is similar to the supply and demand concepts developed earlier in the study of product markets. This unit deals with the similarities and differences between the market for outputs--the product market--and the market for inputs--the resource or factor market. The key concept in the study of the factor market is Marginal Productivity Analysis. This helps explain how wages, rent, interest and profit are determined. This unit will make up 10-15% of the AP Exam.

OBJECTIVES

1. Describe the differences between product markets and factor markets
2. Define Derived Demand
3. Define Marginal Physical Product
4. Define Marginal Revenue Product
5. Given the appropriate data, construct a Marginal Revenue Product Schedule for a resource used for production in a perfectly competitive market
6. Given the appropriate data, construct a Marginal Revenue Product Schedule for a resource used for production in an imperfectly competitive market
7. Define Marginal Resource Cost
8. List the factors that would change a firm's demand for a resource
9. State the Profit-Maximizing principle used to determine how much of a given resource a firm will use
10. State the Least-Cost rule for determining which combination of resources a firm will use
11. Explain the major assumptions of the marginal productivity theory
12. Define a Monopsony and explain how resource prices and output would be determined in such a market
13. Define economic rent
14. Distinguish between interest, rent, wages and profits 


UNIT V: MARKET FAILURE: THE ROLE OF THE GOVERNMENT (5-7 days) UNIT TEST: 1/19
It is important for students to understand the arguments for and against government intervention in otherwise competitive markets. In this unit, we will examine market failures due to negative and positive externalities, and analyze government microeconomic policies such as subsidies, taxes and the provision of public goods. Government policies will be evaluated against a criteria of efficiency and equity. This unit will make up 8-12% of the AP Exam.

OBJECTIVES

1. Define public goods
2. Describe the characteristics of a public good
3. Develop a rationale for determining which goods should be produced by the private sector and which goods should be produced by the public sector
4. Develop a criteria for evaluating the effectiveness of government programs
5. Define and give examples of externalities and third-party costs
6. Explain overproduction and underproduction
7. Define and differentiate between the progressive, regressive, proportional, ability-to-pay and benefits-received theories of taxation
8. Develop a criteria for evaluating the effectiveness and fairness of a tax 


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