Unit 1: Basic Economic Concepts (9–11 Class Periods, 12–15% AP Exam Weighting)

Big Idea 1—Scarcity and Markets (MKT): How do individuals and economies confront

the problem of scarcity?

Big Idea 2—Costs, Benefits, and Marginal Analysis (CBA): Why do all decisions have costs? Why do people consider the additional costs and benefits of possible actions rather than just the total costs and benefits when making decisions?

Skill 1.A: Throughout the unit, students will have to demonstrate a written understanding of economic concepts, principles, and models covered, including all vocabulary terms highlighted in the Krugman text.

 Mod 1: The Study of Economics

Skill 1.B: Students will create their own scenario (individually) to demonstrate the concept of scarcity within their environment as a student.

• How scarcity and choice are central to the study of economics ƒ How property rights and incentives cause market economies to differ from command economies
• The importance of opportunity cost and marginal analysis in individual choice and decision making
• The difference between positive economics and normative economics ƒ When economists agree and why they sometimes disagree ƒ What makes macroeconomics different from microeconomics

Mod 3: The Production Possibilities Curve

Skill 4.A: Students will draw an accurately labeled Production Possibilities

• That sometimes a very simple model can be a powerful way of explaining important economic concepts
• How the production possibilities model helps economists think about the trade-offs every economy faces
• How the production possibilities model helps us understand three important aspects of the real economy: efficiency, opportunity cost, and economic growth

 Mod 4: Comparative Advantage and Trade

Skill 2.C: Students will complete a worksheet to demonstrate their knowledge and use of marginal analysis to determine which party has comparative advantage, and whether they should trade.

• How trade leads to gains for an individual and for national economies
• The important distinction between absolute advantage and comparative advantage
• How comparative advantage leads to gains from trade in the global marketplace

Mod 51: Utility Maximization

• How consumers make choices about the purchase of goods and services
• Why a consumer’s goal is to maximize utility
• Why the principle of diminishing marginal utility applies to the consumption of most goods and services
• How to use marginal analysis to find the optimal consumption bundle.

 

Unit 2: Supply and Demand (13–15 Class Periods, 20–25% AP Exam Weighting)

Big Idea 1—Scarcity and Markets (MKT): How do individuals and economies confront the problem of scarcity?

Big Idea 4—Market Inefficiency and Public Policy (POL): How does government policy affect market outcomes?

Skill 1.A: Throughout the unit, students will have to demonstrate a written understanding of economic concepts, principles, and models covered, including all vocabulary terms highlighted in the Krugman text.

Skill 4.A: Throughout the unit, students will draw accurately labeled supply and demand graphs.

 

Mod 5: Supply and Demand—Introduction and Demand

• What a competitive market is and how it is described by the supply and
• demand model
• What the demand curve is
• The difference between movements along a demand curve and changes in demand
• The factors that shift demand curves

Mod 6: Supply and Demand—Supply

• What the supply curve is
• The difference between movements along a supply curve and changes in supply
• The factors that shift supply curves
• How supply and demand curves determine a market’s equilibrium price and equilibrium quantity
• In the case of a shortage or surplus, how price moves the market back to equilibrium

 Mod 7: Supply and Demand—Equilibrium

• How equilibrium price and quantity are affected when there is a change in either supply or demand
• How equilibrium price and quantity are affected when there is a simultaneous change in both supply and demand

 Mod 8: Supply and Demand—Price Controls (Ceilings and Floors)

Skills 4.A and 4.C: Students will graph various scenarios in which price ceilings and floors are implemented and determine the overall effects of these interventions on the market.

• The meaning of price controls, one-way governments intervene in markets
• How price controls can create problems and make a market inefficient
• Why economists are often deeply skeptical of attempts to intervene in markets
• Who benefits and who loses from price controls, and why they are used despite their well-known problems.

 Mod 9: Supply and Demand—Quantity Controls

• The meaning of quantity controls, another way government intervenes in markets
• How quantity controls create problems and can make a market inefficient
• Who benefits and who loses from quantity controls, and why they are used despite
• their well-known problems

 Mod 46: Income and Substitution Effects, and Elasticity

• How the income and substitution effects explain the law of demand
• The definition of elasticity, a measure of responsiveness to changes in prices or incomes
• The importance of the price elasticity of demand, which measures the responsiveness of the quantity demanded to changes in price
• How to calculate the price elasticity of demand

 Mod 47: Interpreting Price Elasticity of Demand

Skill 3.C: Students will complete various worksheets and practice problems to show their understanding of the impact of the price elasticity of demand on the markets for various goods. CR6

• The difference between elastic and inelastic demand
• The relationship between elasticity and total revenue
• Changes in the price elasticity of demand along a demand curve
• The factors that determine price elasticity of demand

Mod 48: Other Important Elasticities

• How the cross-price elasticity of demand measures the responsiveness of demand for one good to changes in the price of another good
• The meaning and importance of the income elasticity of demand, a measure of the responsiveness of demand to changes in income
• The significance of the price elasticity of supply, which measures the responsiveness of the quantity supplied to changes in price
• The factors that influence the size of these various elasticities

 Mod 49: Consumer and Producer Surplus

• The meaning of consumer surplus and its relationship to the demand curve
• The meaning of producer surplus and its relationship to the supply curve

 Mod 50: Efficiency and Deadweight Loss

Skills 3.A, 4.A, and 4.B: Students will draw accurately labeled graphs identifying areas of deadweight loss when given sufficient information on a practice worksheet and show a written understanding of how taxes can impact total surplus, create deadweight loss, and cause inefficiency in a market.

• The meaning and importance of total surplus and how it can be used to illustrate allocative efficiency in markets
• How taxes affect total surplus and can create deadweight loss
• How the division of the tax, or incidence, depends upon the relative price elasticities of demand and supply

Mod 44: Barriers to Trade

• The effects of trade and trade interventions
• The meaning of tariffs and quotas
• How to illustrate trade and trade interventions using supply and demand graphs

 

Unit 3: Behind the Supply Curve—Profit, Production, and Costs (11–13 Class Periods, 22–25% AP Exam Weighting)

Big Idea 2—Costs, Benefits, and Marginal Analysis (CBA): Why do all decisions have costs? Why do people consider the additional costs and benefits of possible actions rather than just the total costs and benefits when making decisions?

Big Idea 3—Production Choices and Behavior (PRD): What drives producers’ decision making? How can a market be perfectly competitive?

Skill 1.A: Throughout the unit, students will have to demonstrate a written understanding of economic concepts, principles, and models covered, including all vocabulary terms highlighted in the Krugman text.

 

Mod 52: Defining Profit

• The difference between explicit and implicit costs and their importance in decision making
• The different types of profit, including economic profit, accounting profit, and normal profit
• How to calculate profit

 Mod 53: Profit Maximization

Skill 2.A: Students will complete a worksheet using marginal analysis to determine

where a firm’s profits are maximized.

• The principle of marginal analysis
• How to determine the profit-maximizing level of output using the optimal output rule

 Mod 54: The Production Function

• The importance of the firm’s production function, the relationship between the quantity of inputs and the quantity of output
• Why production is often subject to diminishing returns to inputs

 Mod 55: Firm Costs

• The various types of cost a firm faces, including fixed cost, variable cost, and total cost
• How a firm’s costs generate marginal cost curves and average cost curves

Mod 56: Long-Run Costs and Economies of Scale

• Why a firm’s costs differ in the short run versus the long run
• How a firm can enjoy economies of scale

 Mod 57: Introduction to Market Structure

• The meaning and dimensions of market structure
• The four principal types of market structure, and key characteristics of them: perfect competition, monopoly, oligopoly, and monopolistic competition

 Mod 58: Intro to Perfect Competition

• How a price-taking firm determines its profit-maximizing quantity of output
• How to assess whether or not a competitive firm is profitable

 Mod 59: Graphing Perfect Competition

Skills 4.A and 4.B: Students will draw accurately labeled graphs using practice worksheets and scenarios to demonstrate their understanding of perfect competition, identifying profit and loss and determining whether a firm should continue operating.

• How to evaluate a perfectly competitive firm’s situation using a graph
• How to determine a perfect competitor’s profit or loss
• How a firm decides whether to produce or shut down in the short run

 Mod 60: Long-Run Outcomes in Perfect Competition

• Why industry behavior differs between the short run and the long run
• What determines the industry supply curve in both the short run and the long run

 

Unit 4: Imperfect Competition (8–10 Class Periods, 15–22% AP Exam Weighting)

Big Idea 3—Production Choices and Behavior (PRD): What drives producers’ decision making? How can a market be perfectly competitive?

 

Mod 61: Intro to Monopoly

Skill 1.D: Students will begin completing a chart that they will continue throughout the unit, comparing and contrasting the different market structures.

Skill 4.B: Students will create a graph appropriate to each scenario when assigned one at random draw. This activity will be repeated throughout the unit with the different market structures, ensuring that students can identify which market structure is being represented as well as graphing it accurately.

• How a monopolist determines the profit-maximizing price
• How to determine whether a monopoly is earning a profit or a loss
• How the monopoly outcome is different from the long-run outcome in perfect competition

 Mod 62: Monopoly and Public Policy

• The effects of monopoly on society’s welfare
• How policymakers address the problems posed by monopoly

 Mod 63: Price Discrimination

• The meaning of price discrimination
• Why common examples of price discrimination are so prevalent when producers have market power

 Mod 64: Intro to Oligopoly

• Why oligopolists have an incentive to act in ways that reduce their combined profit
• Why oligopolies can benefit from collusion

 Mod 65: Game Theory

Skill 2.C: Students will demonstrate their ability to identify a dominant strategy and Nash equilibrium in a 2 x 2 payoff matrix through the use of rapid-fire sample problems.

• How oligopoly can be analyzed using game theory
• The concept of the prisoners’ dilemma
• How repeated interactions among oligopolists can result in collusion in the absence of any formal agreement

 Mod 66: Oligopoly in Practice

• The legal background of antitrust policy
• The factors that limit tacit collusion
• The causes and effects of price wars, product differentiation, price leadership, and non-price competition
• The importance of oligopoly in the real world

 Mod 67: Intro to Monopolistic Competition

• How prices and profits are determined in monopolistic competition, both in the short run and in the long run
• How monopolistic competition can lead to inefficiency and excess capacity

Mod 68: Product Differentiation and Advertising

• How and why oligopolists and monopolistic competitors differentiate their products
• The economic significance of advertising and brand names

 

Unit 5: Factor Markets (6–10 Class Periods, 10–13% AP Exam Weighting)

Big Idea 3—Production Choices and Behavior (PRD): What drives producers’ decision making? How can a market be perfectly competitive?

Skill 1.A: Throughout the unit, students will have to demonstrate a written understanding of economic concepts, principles, and models covered, including all vocabulary terms highlighted in the Krugman text

 

Mod 69: Introduction and Factor Demand

• How factors of production are traded in factor markets
• How factor markets determine the factor distribution of income
• How the demand for a factor of production is determined

Mod 70: Markets for Land and Capital

Skill 3.B: Students will complete sample AP-style multiple choice problems at the end of the module in the textbook, demonstrating their understanding of the effects of changes on various economic markets.

• How to determine demand and supply in the markets for land and capital
• How to find equilibrium in the capital and land markets
• How the demand for factors leads to the marginal productivity theory of income distribution

 Mod 71: Market for Labor

• The way in which a worker’s decision about time preference gives rise to labor supply
• How to find equilibrium in the perfectly competitive labor market
• How equilibrium in the labor market is determined if either the product or the factor market is not perfectly competitive

 Mod 72: Cost-Minimizing Input Combination

Skill 2.C: Students will demonstrate their ability to identify a profit-maximizing outcome in perfectly competitive factor markets by completing a practice worksheet.

• How firms determine the optimal input mix
• The cost-minimizing rule for hiring inputs

 

Unit 6: Market Failure and the Role of Government (9–11 Class Periods, 8–13% AP Exam Weighting)

 Big Idea 4—Market Inefficiency and Public Policy (POL): How does government policy affect market outcomes?

Skill 1.A: Throughout the unit, students will have to demonstrate a written understanding of economic concepts, principles, and models covered, including all vocabulary terms highlighted in the Krugman text

 

Mod 74: Introduction and Externalities

• What externalities are and why they can lead to inefficiency in a market economy
• Why externalities often require government intervention
• The difference between negative consumption externalities, positive consumption
• externalities, negative production externalities, and positive production externalities

 Mod 75: Externalities and Public Policy

Skill 4.C: Students will create graphs to show the effects of government intervention

in various situations.

• How external benefits and costs cause inefficiency in markets
• Why some government policies to deal with externalities—such as emissions taxes,
• tradable emissions permits, and Pigouvian subsidies—are efficient, although others, including environmental standards, are not

 Mod 76: Public Goods

• How public goods are characterized and why markets fail to supply efficient quantities of public goods
• What common resources are and why they are overused.
• What artificially scarce goods are and why they are under-consumed
• How government intervention in the production and consumption of these types of goods can make society better off
• Why finding the right level of government intervention is often difficult

 Mod 77: Public Policy to Promote Competition

• The three major antitrust laws and how they are designed to promote competition
• How government regulation is used to prevent inefficiency in the case of natural monopoly
• The pros and cons of using marginal cost pricing and average cost pricing to regulate prices in natural monopolies

 Mod 78: Income Inequality and Income Distribution

• What defines poverty, what causes poverty, and the consequences of poverty
• How income inequality is measured, and how it has changed over time in America; how programs like Social Security affect poverty and income inequality

Mod 73: Theories of Income Distribution

• Labor market applications of the marginal productivity theory of income distribution
• Sources of wage disparities, including the role of discrimination