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Other AP Macroeconomics unit study guides
AP Macroeconomics Ultimate Guide
Unit 1: Basic Economic Concepts
Unit 2: Economic Indicators and the Business Cycle
Unit 3: National Income and Price Determination
Unit 4: Financial Sector
Unit 5: Long-Run Consequences of Stabilization Policies
Unit 6: Open Economy—International Trade and Finance
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Module 1: The Study of Economics 

Economics : Study of choice and scarcity

  • Every economic issue involves ==individual choice ==

  • The United States has a market economy

  • No central authority is making choices for the consumer

  • An alternative to market economy is ==central economy ==

  • In central economy, there is a central authority

Market Economy

Command Economy

1. No central authority

1. There is a central authority

2. Consumers and producers are free to consume and produce what they think is profitable

2. The central authority makes production and consumption decisions.

Countries practicing : USA

Soviet Union (1917-1991)

Producers are free to charge higher prices when there is a shortage of something

Prices are always regulated by the central body

Profit is always ensured

Profit is compromised

  • Failure of Command economy in the Soviet Union

    1. Lack of raw materials to produce

    2. Nobody wanted the products which were being produced

    3. Consumers had trouble finding essential commodities (with having to stand at long lines)

    4. Lack of incentives'

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AP Macroeconomics
AP Macroeconomics

Module 1: The Study of Economics 

Economics : Study of choice and scarcity

  • Every economic issue involves ==individual choice ==

  • The United States has a market economy

  • No central authority is making choices for the consumer

  • An alternative to market economy is ==central economy ==

  • In central economy, there is a central authority

Market Economy

Command Economy

1. No central authority

1. There is a central authority

2. Consumers and producers are free to consume and produce what they think is profitable

2. The central authority makes production and consumption decisions.

Countries practicing : USA

Soviet Union (1917-1991)

Producers are free to charge higher prices when there is a shortage of something

Prices are always regulated by the central body

Profit is always ensured

Profit is compromised

  • Failure of Command economy in the Soviet Union

    1. Lack of raw materials to produce

    2. Nobody wanted the products which were being produced

    3. Consumers had trouble finding essential commodities (with having to stand at long lines)

    4. Lack of incentives'