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Unit 1 · Basic Economic Concepts Unit Hub Flashcards Cheat Sheet Essentials Visual Review MC Practice FRQ Practice

AP Microeconomics Unit 1 Visual Review

An 8-slide visual review of Basic Economic Concepts — the PPC, comparative advantage, and supply and demand, built right into the page.

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UNIT 1 · SLIDE 1 Scarcity & the Production Possibilities Curve Good Y (capital goods) Good X (consumer goods) A B C A · On the curve — efficient All resources fully employed. Producing more of one good requires giving up some of the other. B · Inside the curve — inefficient Unemployment or misallocated resources. The economy could produce more of BOTH goods at no extra cost. C · Outside the curve — unattainable Impossible with current resources and technology. Only reachable if the economy grows (Slide 3). Scarcity forces choices — and every choice has an opportunity cost: the next-best alternative given up. The Review Hub · AP Microeconomics Unit 1
Any point on the curve (A) is productively efficient. Points inside (B) waste resources. Points outside (C) are unattainable until the economy grows. Know all three for the exam — they show up constantly in MCQs.
UNIT 1 · SLIDE 2 Why the PPC Bows Outward small cost large cost Equal moves right cost more and more Good Y Bowed-out PPC = increasing opportunity cost Resources are specialized — not equally good at producing both goods. As you make more of one good, you pull in resources that are worse and worse at it, so each extra unit costs more of the other good. Straight-line PPC = constant opportunity cost Resources are perfectly adaptable between the two goods — every trade-off is the same ratio. Common in comparative-advantage FRQs. Law of increasing opportunity cost: producing more of a good raises the cost of each additional unit. The Review Hub · AP Microeconomics Unit 1
A bowed-out PPC means increasing opportunity cost (specialized resources). A straight-line PPC means constant opportunity cost — that's the version used in comparative advantage problems.
UNIT 1 · SLIDE 3 Economic Growth — Shifting the Whole PPC PPC₁ PPC₂ Growth shifts the entire curve outward Shifts OUTWARD (growth) when… • More resources: land, labor, capital, entrepreneurs • Better technology or production methods • More education / training (human capital) • Trade (consume beyond the PPC — Slide 4) Shifts INWARD when… • Natural disaster, war, or population loss • Destruction or depletion of capital / resources Unemployment does NOT shift the curve — it just moves the economy to a point inside it. Investing in capital goods today sacrifices consumption now but produces faster growth later. The Review Hub · AP Microeconomics Unit 1
Growth shifts the entire PPC outward — driven by more resources, better technology, or more human capital. Unemployment never shifts the curve; it only moves the economy to a point inside it.
UNIT 1 · SLIDE 4 Comparative Advantage & Gains from Trade OUTPUT PER DAY Wheat Cloth Country A 30 15 Country B 10 20 Opportunity cost of 1 Wheat Country A: 15 ÷ 30 = 0.5 Cloth ✓ lower Country B: 20 ÷ 10 = 2 Cloth → A specializes in Wheat · B specializes in Cloth 3-step method (works every time) 1. Compute each producer's opportunity cost (give up ÷ get — "other good over this good") 2. Lower opportunity cost = comparative advantage 3. Specialize + trade at a rate BETWEEN the two opportunity costs (here: 0.5 < price < 2 cloth/wheat) Absolute vs. comparative advantage Absolute = produces MORE with the same resources. Comparative = LOWER opportunity cost. Trade follows comparative advantage — never absolute. Both countries gain when each specializes by comparative advantage and trades between the opportunity costs. The Review Hub · AP Microeconomics Unit 1
Compare opportunity costs, not raw output. The producer with the lower opportunity cost has the comparative advantage and should specialize. Mutually beneficial terms of trade always fall between the two opportunity costs.
UNIT 1 · SLIDE 5 Demand — the Law & the Shifters D₁ D₂ Price Quantity demanded Demand shifters — "TRIBE" Tastes and preferences Related goods' prices — substitutes & complements Income — normal goods ↑ · inferior goods ↓ Buyers — number of consumers in the market Expectations of future prices or income Any shifter → the WHOLE curve moves (D₁ → D₂). Own price change → movement ALONG the curve. Why demand slopes down Substitution effect + income effect + diminishing marginal utility — each extra unit is worth less to you. Exam trap: a change in the good's own price NEVER shifts its demand curve — it moves you along it. The Review Hub · AP Microeconomics Unit 1
The law of demand: price up, quantity demanded down. Memorize the TRIBE shifters — they move the whole curve. The good's own price only causes movement along the curve.
UNIT 1 · SLIDE 6 Supply — the Law & the Shifters S₁ S₂ Price Quantity supplied Supply shifters — "ROTTEN" Resource (input) costs — wages, materials, energy Other goods' prices the firm could produce instead Technology improvements Taxes (shift left) & subsidies (shift right) Expectations of future prices Number of sellers in the market Right shift = more supplied at every price. Own price change → movement ALONG the curve. Why supply slopes up Higher prices cover rising marginal costs → produce more. Lower input costs or better technology shift supply right — producers offer more at every price. The Review Hub · AP Microeconomics Unit 1
The law of supply: price up, quantity supplied up. The ROTTEN shifters move the whole curve — resource costs and technology are the two the exam tests most.
UNIT 1 · SLIDE 7 Market Equilibrium, Shortage & Surplus D S Pₑ Qₑ E P above Pₑ → surplus (Qs > Qd) P below Pₑ → shortage (Qd > Qs) Surplus — price too HIGH Sellers want to sell more than buyers will buy. Unsold inventory piles up → price FALLS toward Pₑ. Shortage — price too LOW Buyers want more than sellers will offer. Lines and empty shelves → price RISES toward Pₑ. Double-shift rule When BOTH curves shift, either price or quantity becomes indeterminate — depends on shift sizes. Markets self-correct: prices adjust until Qd = Qs at the equilibrium point E. The Review Hub · AP Microeconomics Unit 1
Equilibrium sits where supply crosses demand. A price above Pₑ creates a surplus that pushes price down; a price below Pₑ creates a shortage that pushes price up.
UNIT 1 · SLIDE 8 Unit 1 Quick Reference — Know These Cold Opportunity cost Opp. cost of X = what you give up ÷ what you get Includes explicit (money) AND implicit (time, forgone wages) costs. Economic cost = explicit + implicit costs Marginal analysis Do an activity as long as MB ≥ MC. Optimal quantity is where marginal benefit exactly equals marginal cost (MB = MC). Sunk costs are irrelevant to decisions PPC checklist On curve = efficient · inside = inefficient outside = unattainable · growth = outward shift Bowed out = increasing opportunity cost Straight line = constant opportunity cost Comparative advantage Lower opportunity cost → specialize in that good. Terms of trade must fall between the two opportunity costs for both sides to gain. Output problems: "other over" · Input problems: flip it Unit 1 is 12–15% of the exam — PPC and comparative advantage are near-guaranteed FRQ material. The Review Hub · AP Microeconomics Unit 1
The night-before checklist: opportunity cost math, MB = MC logic, the four PPC point types, and the comparative advantage method. If you can sketch and explain each one, Unit 1 is locked in.
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How to use the visual review

Spend 30 seconds per step before clicking next. Look at the diagram, then ask yourself: "Could I sketch this from memory and label every part?"

Use the dots below the diagram to jump straight to any step, or the arrow keys to move forward and back.

This is great for review the night before the exam — fast, visual, and covers every core diagram you need to remember from Unit 1.