AP Economics
Mr. Bernstein
Module 1: The Study of Economics
September 2015
AP Economics
Mr. Bernstein
Resources are Scarce
• Land
• Labor
• Capital
• Entrepreneurship or Human Capital
Scarcity implies choices must be made by
individuals, corporations or societies
• Example: Building a dam…or fracking
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AP Economics
Mr. Bernstein
Opportunity Cost
• The Real Cost of Something Is What You Must
Give Up to Get It
• Example: Buy a new phone for $200, but now
cannot buy new shoes
• Economic costs are $200 PLUS the enjoyment
of wearing new shoes, which you now can’t do
• Opportunity costs are implicit, not explicit
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AP Economics
Mr. Bernstein
The Difference between Micro and Macro
• Microeconomics focuses on choices made by
individuals, households, or firms—the smaller
parts that make up the economy as a whole.
• Macroeconomics focuses on economic
aggregates—economic measures such as the
unemployment rate, the inflation rate, and gross
domestic product—that summarize data across
many different markets. Macroeconomics focuses
on the bigger picture.
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AP Economics
Mr. Bernstein
Positive vs Normative Economics
• Positive economics: Analysis used to determine
how the world works; no judgments applied…”what
is” or “what will be”
• Normative economics: How the world should be;
may involve value judgments on right and wrong
• Examples: “It is 80 degrees in here” vs. “It’s too hot
in here”
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AP Economics
Mr. Bernstein
When and Why Economists Disagree
• Economists may disagree because they have
different values or opinions
• Economists may disagree because they use
different models or methods to conduct their
analysis
• Over time, disputes in economics are resolved by
the accumulation of evidence (but this can
sometimes take a long time!)
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