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Economics AP


Course Outline


AP Economics:


Course Overview:

AP Economics is taught as a full-year course, with microeconomics in the fall and macroeconomics in the spring. The aim of AP Economics is to provide students with a learning experience that is equivalent to that obtained in a typical college-level introduction to economics course. AP Macroeconomics is designed to provide students with a thorough understanding of the principles of economics that apply to the economic system as a whole. AP Macroeconomics emphasizes the study of national income, economic performance measures, economic growth, and international economics. Students learn to think like economists: to question, to evaluate marginal costs and marginal benefits, and explore the many ways in which one action causes secondary actions.


Course Objectives:

There are five course objectives in this class:

1. To promote economic literacy, a working knowledge of the most important concepts in microeconomics and macroeconomics.

2. To develop and strengthen analytical skills. Specifically, students will build an economics toolkit that they will use to analyze important public policy questions.

3. To develop appropriate and logical mathematical skills to construct and analyze economic graphs.

4. To work efficiently with others to solve problems and produce a final project.

5. To prepare for and successfully pass the AP Macroeconomics exam.


Course Outline:


Each unit will take approximately 2-3 weeks to complete. Each unit will consist of homework assignments, outside reading, in-class activities, and a test.


Unit 1: Basic Economic Concepts

A. Scarcity, choice, and opportunity cost

B. Production possibilities curve

C. Comparative advantage, absolute advantage, specialization, and trade

D. Economic systems

E. Property rights and the role of incentives

F. Marginal analysis

Chapter Assignment: 1 and 2

Unit II: The Nature and Functions of Product Markets

A. Supply and demand

1. Market equilibrium

2. Determinants of supply and demand

3. Price and quantity controls

4. Elasticity

a. Price, income, and cross-price elasticities of demand

b. Price elasticity of supply

5. Consumer surplus, producer surplus and market efficiency

6. Tax incidence and deadweight loss

B. Theory of consumer choice

1. Total utility and marginal utility

2. Utility maximization: equalizing marginal utility per dollar

3. Individual and market demand curves

4. Income and substitution effects

C. Production and costs

1. Production functions: short and long run

2. Marginal product and diminishing return

3. Short-run costs

4. Long-run costs and economies of scale

5. Cost minimizing input combination

D. Firm behavior and market structure

1. Profit

a. Accounting versus economic profits

b. Normal profit

c. Profit maximization: MR=MC rule

2. Perfect competition

a. Profit maximization

b. Short-run supply and shutdown decision

c. Behavior of firms and markets in the short run and in the long run

d. Efficiency and perfect competition

3. Monopoly

a. Sources of market power

b. Profit maximization

c. Inefficiency of monopoly

d. Price discrimination

e. Natural monopoly

4. Oligopoly

a. Interdependence, collusion, and cartels

b. Game theory and strategic behavior

5. Monopolistic competition

a. Product differentiation and role of advertising

b. Profit maximization

c. Short-run and long-run equilibrium

d. Excess capacity and inefficiency

Chapter Assignments: 3 and 4

Unit 3: Factor Markets

A. Derived factor market

B. Marginal revenue product

C. Labor market and firms’ hiring of labor

D. Market distribution of income

Unit 4: Market Failure and the Role of Government

A. Externalities

1. Marginal social benefit and marginal social cost

2. Positive externalities

3. Negative externalities

4. Remedies

B. Public goods

1. Public versus private goods

2. Provision of public goods

C. Public policy to promote competition

1. Antitrust policy

2. Regulation

D. Income distribution

1. Equity

2. Sources of income inequality


Unit 5: Measurement of Economic Performance

A. National income accounts

1. Circular flow

2. Gross domestic product

3. Components of gross domestic product

4. Real versus nominal gross domestic product

B. Inflation measurement and adjustment

1. Price indices

2. Nominal and real values

3. Costs of inflation

C. Unemployment

1. Definition and measurement

2. Types of unemployment

3. Natural rate of unemployment

Chapter Assignments: 5, 6, and 7

Unit 6: National Income and Price Determination

A. Aggregate demand

1. Determinants of aggregate demand

2. Multiplier and crowding-out effect

B. Aggregate supply

1. Short-run and long-run analyses

2. Sticky versus flexible wages and prices

3. Determinants of aggregate supply

C. Macroeconomics equilibrium

1. Real output and price level

2. Short and long run

3. Actual versus full-employment output

4. Economic fluctuations

Chapter Assignments: 8, 13

Unit 7: Financial Sector

A. Money, banking, and financial markets

1. Definition of financial assts: money, stocks, bonds

2. Time value of money (present and future value)

3. Measures of money supply

4. Banks and creation of money

5. Money demand

6. Money market

7. Loanable funds market

B. Central bank and control of the money supply

1. Tools of central bank policy

2. Quantity theory of money

3. Real versus nominal interest rates

Chapter Assignment: 9, 10, and 11

Unit 8: Inflation, Unemployment, and Stabilization Policies

A. Fiscal and monetary policies

1. Demand-side effects

2. Supply-side effects

3. Policy mix     

4. Government deficits and debt

 B. Inflation and unemployment

1. Types of inflation

a. Demand-pull inflation

b. Cost-push inflation

2. The Phillips curve: short run versus long run

3. Role of expectations

Chapter Assignments: 14, 15, 16, and 17

Unit 9: Economic Growth and Productivity

A. Investment in human capital

B. Investment in physical capital

C. Research and development, and technological progress

D. Growth policy

Chapter Assignments: 23

Unit 10: Open Economy: International Trade and Finance

A. Balance of payments accounts

1. Balance of trade

2. Current account

3. Capital account

B. Foreign exchange market

1. Demand for and supply of foreign exchange

2. Exchange rate determination

3. Currency appreciation and depreciation

C. Net Exports and capital flows

D. Links to financial and goods markets

Chapter Assignments: 20, 21, and 22

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