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AP Microeconomics Unit1 Topic1 Scarcity Study Guide

Study guide for AP Microeconomics Unit1 Topic 1 Scarcity. First topic in the first unit of AP Micro. Full study guide with all content and even contains practice questions.

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24 views

AP Microeconomics Unit1 Topic1 Scarcity Study Guide

Study guide for AP Microeconomics Unit1 Topic 1 Scarcity. First topic in the first unit of AP Micro. Full study guide with all content and even contains practice questions.

Uploaded by

Jayr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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AP Microeconomics: Unit 1, Topic 1 -

Scarcity Study Guide


Learning Objectives
- Define resources and understand the cause(s) of their scarcity.

Enduring Understanding
- Scarcity is a fundamental economic problem where resources are limited, leading to
constraints and trade-offs in their use.

Essential Knowledge
1. Economic Trade-Offs:
- Economic trade-offs arise from the lack of sufficient resources to meet society’s wants
and needs.

2. Factors of Production:
- Scarce Resources: Most factors of production, such as land, labor, and capital, are limited
and hence scarce.
- Non-Scarce Resources: Some resources, like established knowledge, may not be scarce
due to their non-rival nature.

Lesson Outline

1. Introduction to Scarcity
Definition of Resources:
- Resources are inputs used to produce goods and services. They are categorized into four
main types:
1. Land: Natural resources like minerals, forests, water, and land.
2. Labor: Human effort, including physical and mental work.
3. Capital: Manufactured goods used in the production process, such as machinery, tools,
and buildings.
4. Entrepreneurship: The ability to combine land, labor, and capital to produce goods and
services.

Scarcity Defined:
- Scarcity refers to the limited availability of resources relative to the unlimited wants and
needs of people.
- This limitation forces individuals, businesses, and governments to make choices about
how to allocate resources effectively.
2. The Causes of Scarcity
Natural Constraints:
- Finite Resources: Many resources, such as oil or minerals, are finite and cannot be
replenished once used.

Demand and Supply Imbalance:


- High Demand: A higher demand for certain goods and services increases the strain on
available resources.
- Limited Supply: Resources may be limited due to geographical, environmental, or
technological factors.

3. Economic Trade-Offs
Opportunity Cost:
- The concept of opportunity cost is crucial in understanding economic trade-offs. It refers
to the value of the next best alternative foregone when a choice is made.
- For example, if a government chooses to allocate more funds to healthcare, it might have
to reduce spending on education, which is the opportunity cost.

Examples of Trade-Offs:
- Individuals: Choosing to spend money on a vacation instead of saving for a new car.
- Businesses: Deciding whether to invest in new technology or expand production
capacity.
- Governments: Allocating resources to military spending versus social welfare programs.

4. Factors of Production: Scarcity vs. Non-Scarcity


Scarce Factors of Production:
- Land: Limited availability of arable land and natural resources.
- Labor: Skilled labor can be scarce, particularly in specialized industries.
- Capital: Financial constraints may limit the ability to purchase new capital goods.

Non-Scarce Factors:
- Established Knowledge: Once created, knowledge can be shared and used by many
without diminishing its value (non-rivalrous). For example, the use of a mathematical
formula or a software program can be utilized by multiple individuals without depleting the
resource.

5. Constraints and Trade-Offs in Resource Use


Resource Allocation:
- The concept of scarcity forces economies to allocate resources in ways that maximize
efficiency and meet societal needs.
- Efficient Use: Ensuring that resources are used in a way that maximizes the production of
goods and services.
- Trade-Off Decisions: Every allocation decision involves a trade-off, where choosing one
option means giving up another.

6. Conclusion and Key Takeaways


- Scarcity is a pervasive economic problem that affects individuals, businesses, and
governments.
- Understanding trade-offs and opportunity costs is essential in making informed economic
decisions.
- Factors of production are generally scarce, except for non-rivalrous resources like
knowledge.

Practice Questions
1. Multiple Choice:
Which of the following is not considered a scarce resource?
A) Land
B) Labor
C) Capital
D) Established knowledge
- Answer: 4. Established knowledge

2. Free Response:
- Explain the concept of opportunity cost and provide an example of how it applies to a
government decision regarding resource allocation.

Further Reading/Resources
- Textbook: Krugman’s Economics for AP
- Videos: Khan Academy’s AP Microeconomics - Scarcity and Choice

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