AP Macroeconomics Visuals Unit1

Production Possibilities Curve

Unit 1 : Macroeconomics
National Council on Economic Education

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Production Possibilities Curve
Constant Opportunity Cost

Decreasing Opportunity Cost

Unit 1 : Macroeconomics
National Council on Economic Education

http://apeconomics.ncee.net

Absolute Advantage and
Comparative Advantage
•

ABSOLUTE ADVANTAGE
One individual or nation can produce more output with the same resources as another individual or nation.

•

COMPARATIVE ADVANTAGE
One individual or nation can produce a good at a lower opportunity cost than another

•

EXAMPLES OF COMPARATIVE ADVANTAGE
Economics professor and secretary
Auto mechanic and medical doctor

Unit 1 : Macroeconomics
National Council on Economic Education

http://apeconomics.ncee.net

Determining Comparative
Advantage (Output Method)

1.

Which nation has an absolute advantage in producing corn?

2.

Which nation has an absolute advantage in producing sunscreen? 3.

Which nation has a comparative advantage in producing corn? 4.

Which nation has a comparative advantage in producing sunscreen? 5.

Should Mexico specialize in corn or sunscreen?

6.

Should France specialize in corn or sunscreen?

Unit 1 : Macroeconomics
National Council on Economic Education

http://apeconomics.ncee.net

Movement Along a Demand Curve

As the price declines from P to P1, the quantity increases from
Q to Q1
Unit 1 : Macroeconomics
National Council on Economic Education

http://apeconomics.ncee.net

Shift in Demand

Factors that Shift Demand:
1.

Number of Consumers

2.

Price of complementary good

3.

Price of substitute good

4.

Consumer income

5.

Expectations about income or prices Increase in demand from D to D1 shows that at the same price
(P), the quantity increased from Q to Q1

Unit 1 : Macroeconomics
National Council on Economic Education

http://apeconomics.ncee.net

Movement Along a Supply Curve

As the price declines from P1 to P, the quantity decreases from
Q1 to Q.