The AP curriculum already asks students to examine consumer and producer surplus in a host of scenarios. Students examine loss to the total surplus (deadweight loss) as a means to compare the efficiency of various market structures and government regulations. This unit will ask students to move beyond basic analysis of efficiency and have them also answer the larger questions of who benefits and how do the benefits play a role in either closing or widening the inequality gap. When analyzing product market structures, students will compare perfectly competitive markets to imperfectly competitive markets. Students will consider the pros and cons of barriers to entry and debate the extent to which firms should have the right to monopolize the production of a given product. Within the factor markets, students will examine monopsonies and analyze who is affected by the wage setting power of the firm. Students will also debate the merits of a minimum wage to those of a guaranteed basic income. Finally, students will learn about price ceilings, price floors, taxes, subsidies, and tariffs and discuss the differences between fairness and efficiency.
Below are some questions that students will consider as they progress through the AP curriculum. Students should consider how each government regulation affects consumers and producers. Are all consumers and producers affected the same way? If not, how does each impact inequality in America?
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Does inequality matter from an economic standpoint?
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Price ceilings result in lower prices for consumers. Do all consumers benefit? Do price ceilings increase or decrease inequality?
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International trade decreases prices for consumers. Do all consumers benefit? Does trade increase or decrease inequality?
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Tariffs raise prices for domestic producers. Do consumers benefit? Do tariffs increase or decrease inequality?
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Minimum wage results in higher hourly wages. Do all workers benefit? Does a higher minimum wage increase or decrease inequality?
Recommended Course Outline
The brief outline below illustrates the
recommended
order for which the topics in AP Microeconomics can be taught. Teachers should feel free to make changes as needed to fit the confines of their own course. The sequencing below is included to help show how income inequality can be addressed in each of the major units of the course. Students will first learn about income inequality after being exposed to basic economic principles like opportunity cost, supply and demand, elasticity, and consumer and producer theory, but before diving deeper into market structures, factor markets, market failure, and government regulations. This format will allow students to utilize their understanding of basic economic principles to support their study of the other topics through the lens of income inequality.
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Unit 1: Basic Economic Principles
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Defining economics
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Opportunity cost, production possibilities, comparative advantage, trade
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Demand, supply, and market equilibrium
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Elasticity
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Allocative efficiency, consumer and producer surplus, deadweight loss
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Introduction to income inequality: Gini coefficient, Lorenz Curve, and progressive taxation
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Production possibilities through the lens of income inequality
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Unit 2: Consumer and Producer Theory
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Utility and utility maximization
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Total revenue
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Cost functions
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Economic profit and profit maximization
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Unit 3: Product Market Structures
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Introduction to product markets: who are the players and what game are they playing?
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Perfect competition
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Monopoly
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Monopolistic competition
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Oligopoly
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Comparing the four market structures through the lens of income inequality
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Unit 4: Factor Market Structures
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Factors of production, profit maximization, and cost minimization
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Perfectly competitive factor markets
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Monopsony
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Comparing the factor market structures through the lens of income inequality
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Unit 5: Market Failure, Government Regulation, Income Inequality
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Externalities
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Price ceilings
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Price floors
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Taxes
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Subsidies
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Free trade vs. tariffs
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Examining government regulation through the lens of income inequality