AP Macroeconomics
Unit 2: Basic Economic Concepts
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.
a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.
b. Define and give examples of productive resources (factors of production) (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).
c. List a variety of strategies for allocating scarce resources.
d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.
a. Illustrate by means of a production possibilities curve the tradeoffs between two options.
b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers increase the satisfaction of both parties.
a. Give examples of how individuals and businesses specialize.
b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce.
a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation.
b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.
SSEF5 The student will describe the roles of government in a market economy.
a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures.
b. Give examples of government regulation and deregulation and their effects on consumers and producers.
SSEF6 The student will explain how productivity, economic growth, and future standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people.
a. Define productivity as the relationship of inputs to outputs.
b. Give illustrations of investment in equipment and technology and explain their relationship to economic growth.
c. Give examples of how investment in education can lead to a higher standard of living.
SSEMI1 The student will describe how households, businesses, and governments are interdependent and interact through flows of goods, services, and money.
a. Illustrate by means of a circular flow diagram, the Product market; the Resource (factor) market; the real flow of goods and services between and among businesses, households, and government; and the flow of money.
b. Explain the role of money as a medium of exchange.
SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.
a. Define and distinguish between absolute advantage and comparative advantage.
b. Explain that most trade takes place because of comparative advantage in the production of a good or service.
AP Content Specifications
I. Basic Economic Concepts (8-12%)
A. Scarcity, choice, and opportunity costs
B. Production possibilities curve
C. Comparative advantage, specialization, and exchange
Day 1: Scarcity, Trade-offs, Opportunity Cost
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.
a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.
d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.
EQ: How does scarcity relate to choices?
1. Warm Up: Review of implicit and explicit costs. Students must categorize. Discuss.
2. Economics is all about CHOICES. Students complete a simulation in which they must make choices about six items to save from a sinking ship. They identify what their seventh choice would be if they could save a seventh. Students share choices and discuss.
3. Use activity to show how it reflects major economic concepts of scarcity, trade-offs, and opportunity cost.
4. Define concepts and discuss how we saw them in the simulation. Provide practice on differentiating between a shortage and scarcity. (Scarcity of Myley video if time)
5. Closing: Lesson Summary. Develop flow chart showing how scarcity creates the need for choices and leads to opportunity cost.
Flipped Homework Lesson: Factors of Production. Students watch 5 minute video on Factors of Production and answer five questions on Edmodo.
Standards Covered:
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.
b. Define and give examples of productive resources (factors of production) (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).
Day 2: Marginal Decision Making
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.
a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.
b. Define and give examples of productive resources (factors of production) (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.
b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
EQ: How does scarcity relate to choices?
1. Warm Up: Factors of Production categorizing activity to review flipped lesson.
2. Explain to students that when decisions are made, not all decisions are all or nothing. Many are made at the margin.
3. Define marginal and give examples of what it means to think at the margin.
4. Practice 1: Would you see the movie 3 times? Use to develop concept of diminishing marginal utility.
5. Explain rational decision is where Marginal Benefit is greater than or equal to Marginal Cost
6. Practice 2: What happens to the benefit when studying for a test?
7. Practice 3: Wally’s Widgets – Where should Wally STOP producing according to rational thought?
8. Closing: Lesson Summary and Edmodo Review Questions
Day 3: Production Possibilities Curves
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.
a. Illustrate by means of a production possibilities curve the tradeoffs between two options.
b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
EQ: How does a Production Possibilities Curve diagrammatically show scarcity, opportunity cost, and marginal analysis?
1. Warm Up: Marginal Thinking Activity – Where should Jimmy John STOP producing sandwiches?
2. Introduce PPC. Give notes and explanations on all concepts that can be seen on PPC.
3. Pass out AP practice packet. Students work on it.
4. Closing: Lesson Recap.
Day 4: Production Possibilities Curves
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.
a. Illustrate by means of a production possibilities curve the tradeoffs between two options.
b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
EQ: How does a Production Possibilities Curve diagrammatically show choice?
1. Warm Up: PPC Practice
2. Review all PPC activities in PPC packet from previous day. Discuss any issues that students may have.
3. Paul Solman video: The PPC
4. Closing: Lesson Summary – Warn of Quiz
Day 5: Standards 1 and 2 Assessment
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.
a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.
b. Define and give examples of productive resources (factors of production) (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).
c. List a variety of strategies for allocating scarce resources.
d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.
a. Illustrate by means of a production possibilities curve the tradeoffs between two options.
b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
EQ: How does scarcity relate to choices? How does a PPC diagrammatically show choice?
1. Review of Key Ideas
2. Assessment
3. As students finish, students watch Jacob Clifford and mjmfoodie videos on Comparative and Absolute Advantage
4. Closing: Students complete six-question assessment on videos.
Day 6: Comparative Advantage
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers increase the satisfaction of both parties.
a. Give examples of how individuals and businesses specialize.
b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.
a. Define and distinguish between absolute advantage and comparative advantage.
b. Explain that most trade takes place because of comparative advantage in the production of a good or service.
EQ: How does the law of comparative advantage guide better resource use and improve satisfaction levels?
1. Warm Up: Fraction comparison
2. Review of absolute and comparative advantage as a basis for increased productivity and better resource use.
3. Demonstration: How to determine who has the comparative advantage?
4. Practice: Students work on determining comparative advantage in output and input problems. Students will finish AP practice packet as HW.
5. Closing: Lesson recap and who has the comparative advantage example.
Day 7: Comparative Advantage
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers increase the satisfaction of both parties.
a. Give examples of how individuals and businesses specialize.
b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.
a. Define and distinguish between absolute advantage and comparative advantage.
b. Explain that most trade takes place because of comparative advantage in the production of a good or service.
EQ: How does the law of comparative advantage guide better resource use and improve satisfaction levels?
1. Warm Up: Think Pair Share – Students work together on comparative advantage examples. Three examples: One with clear absolute advantages, one with no comparative advantage, one with one dominant party. Discuss differences to understand where comparative advantage is most applicable.
2. Review entire AP practice packet as a group.
3. Assign more comparative advantage practice.
4. Closing: Lesson summary.
Day 8: Comparative Advantage and Terms of Trade
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers increase the satisfaction of both parties.
a. Give examples of how individuals and businesses specialize.
b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.
a. Define and distinguish between absolute advantage and comparative advantage.
b. Explain that most trade takes place because of comparative advantage in the production of a good or service.
AP Concept: Terms of Trade
EQ: How does the law of comparative advantage guide better resource use and improve satisfaction levels?
1. Warm Up: Students TPS on homework from previous night. (File: More comparative advantage practice.
2. Have student explain problem 1.
3. Before answering problem 2, go over guidelines for Econ FRQs.
4. Go over problem 2.
5. Use US/Brazil PPC curves to explain how countries are better off.
6. How do we decide trade ratios? Show example on how to determine acceptable terms of trade
7. Two terms of trade practice problems. (Teacher walks around and assists.)
8. Closing: Go over practice problems.
Day 9: Comparative Advantage Assessment
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers increase the satisfaction of both parties.
a. Give examples of how individuals and businesses specialize.
b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEIN1 The student will explain why individuals, businesses, and governments trade goods and services.
a. Define and distinguish between absolute advantage and comparative advantage.
b. Explain that most trade takes place because of comparative advantage in the production of a good or service.
EQ: How does the law of comparative advantage guide better resource use and improve satisfaction levels?
1. Warm Up: Comparative Advantage and Terms of Trade Practice
2. Comparative Advantage Quiz – Practice FRQ
3. After quiz, students watch Crash Course video on capitalism and communism. Complete Edmodo questions reviewing.
4. Closing: Review Quiz
Day 10: Economic Systems
SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce.
a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation.
b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.
EQ: How does an economic system reflect a society’s values?
1. Warm Up: Practice identifying characteristics of economic systems.
2. Students read and rank economic goals.
3. Small groups. Discuss what is most important. How do they conflict? Can we have it all?
4. Closing: Lesson recap and Edmodo exit ticket.
Day 11: Command Economies
SSEF4 The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce.
a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation.
b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.