Intermediate review of key Microeconomic models including elasticity, cost curves, market structures, and factor markets tailored for the AP exam.
20 cards
Front
Opportunity Cost Definition
Back
The value of the next-best alternative that is foregone when making a decision. It is the true cost of any choice, including both explicit (monetary) and implicit (non-monetary) costs.
Front
Law of Increasing Opportunity Cost
Back
As production of a particular good increases, the opportunity cost to produce an additional unit rises. This occurs because resources are not perfectly adaptable to the production of both goods, causing the Production Possibilities Curve (PPC) to be bowed outwards.
Front
Absolute Advantage vs. Comparative Advantage
Back
Absolute Advantage refers to the ability to produce more of a good with the same resources. Comparative Advantage refers to the ability to produce a good at a lower opportunity cost. Trade is based on Comparative Advantage, not Absolute Advantage.
Front
Calculating Price Elasticity of Demand (PED)
Back
PED = (% Change in Quantity Demanded) / (% Change in Price). Alternatively, using the midpoint method: [(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]. A value greater than 1 is elastic, less than 1 is inelastic.
Front
Total Revenue Test for Elasticity
Back
If Price and Total Revenue move in opposite directions (Price up, TR down), demand is Elastic. If they move in the same direction (Price up, TR up), demand is Inelastic. If TR doesn't change, demand is Unit Elastic.
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