Nawal's AP Macroeconomics Blog

GDP (gross domestic product) : The total market value of goods and services produced within a country's borders within a given year. GNP(gross national product) : A measure of what its citizens produce and whether they produce these items within its borders. What is not included in GDP : Used or second hand goods.(Avoid double or multiple counting) Gifts/ transfer payments. (Come in public or private)(No output being produced). Public: welfare and social security  Private: scholarship Contribute nothing to current production.       3. Stocks and bonds: Purely financial transactions. No output being produced.       4. Unreported business activity: (Tips)      5. Illegal activities: (drugs, prostitution, etc…)       6. Intermediate goods: goods that requires further processing before they are ready for final use. (ex: big mac: cheese, buns, etc)     7. Non-market activities...

Household : A person or a group of people who share an income Firms : An organization that produces goods and services for sale Factor (Resource) Market : It is the market in which factors of production are bought by firms and sold by households Product Market : where goods and services are bought and sold Factor payments (WILLIE RIP) : 1. Land- rents 2. Labor-wages 3. Capital- interest 4. Entrepreneurship- profits

Supply : The quantity that producers or sellers are willing and able to produce or sell at various prices The Law of Supply : There is a direct relationship between price and quantity supplied (as price increases, so does quantity). - A change in price causes a change in quantity supplied. (Supply curves are always upward sloping.) Causes of "Change in supply" :  ▲in the number of seller ▲in the cost of production ▲in technology ▲in weather ▲in taxes and subsidies (money the government provides) Fixed price : Cost that does not change no matter how much of a good is being produced.      -Ex: Salary, mortgage, and insurance Variable cost : Cost that rises or falls depends upon how much is provided.      -Ex: Electricity Marginal cost : cost of producing on more unit of a good  Revenue : Receiving       -Ex: Income Cost : Spending (goes out). Formulas :       ( Key : Q-q...

Demand : The quantities that people are willing and able to buy at various prices. Elasticity of demand : A measure of how consumers react to a change in price. Inelastic demand : Demand will either not change, or change very little , regardless of price. (Needs).      - Few to no substitutes      - Ex: Gas, water, milk, soap, insulin      -E<1 Elastic demand : Demand changes greatly where there is a change in price.      -E>1 Unitary demand : Change in the price of the good, causes an equal change in the quantity demanded.      -E=1 The Law of Demand : There is an inverse relationship between price and quantity demanded (As price increases, quantity decreases).    - A change in price causes a change in quantity demanded. Formulas: ▲in quantity or price= (new-old)/old Price elasticity of demand= (%▲in quantity) / (%▲in price) Total Revenue= Price X Quantity Causes of "Cha...

Production Possibility Graphs (PPG or PPC(curve) or PPF(frontier): - Alternate ways to use resources - Each point on the graph has a trade off - Also shows the most that society can produce if it uses every available resource to the best of its ability. Productive efficiency vs. Allocative efficiency: Pro- Products are being produced in the least costly way. Alloc- The products being produced are the ones that are most desired by society. Example of a Productive Graph: A-F: On the curve X: Inside the curve Y: Outside the curve Inside the curve: Attainable but inefficient. Reasons: Unemployment, underemployment, war, famine, and depression/ recession. On the curve : Attainable and efficient. Reasons: Productive economy. Outside the curve : Unattainable Reasons: Technology and economic growth Concave vs. Constant PPG: -Concave: bowed out   -Constant: the same Answer: Straight line: Corn, Bowed out: Cactus ...

1.       Scarcity : Insufficient productive resources to fulfill all human wants and needs. Fundamental economic problem that all societies. 2.       Economics : The branch of knowledge concerned with the production, consumption and transfer of wealth. 3.        1st Pillar of Economic wisdom : Nothing in or material world can come from nowhere, nor can it be free; everything in or economic life has a source, a destruction and a cost that must be paid by someone. 4.       Five key economic assumptions: A.     Society’s wants are unlimited, but all resources are limited (Scarcity) B.      Due to scarcity, choices must be made. Every choice has a cost (trade off). C.      Everyone’s goal is to make choices that maximize their satisfaction. Everyone acts in self-interest. D.     Everyone makes decisio...