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AP Macroeconomics Unit 1: Basic Economic Concepts

Terms in this set (36)

Scarcity
The economic condition in which limited resources are met with unlimited wants and needs.
Trade-offs
The set of all available alternatives, when one makes a choice.
Opportunity Cost
The most desirable alternative given up when one makes a decision.
Consumer Sovereignty
The power of consumers to decide what gets produced.
Economics
The study of how choices are made given the fundamental condition of scarcity.
Allocate
To distribute
Productive Resources
The land, labor, capital (human and physical), and entrepreneurship used to produce all goods and services.
Land
All natural resources used in the production of goods and services
Labor
The human effort provided in the creation of goods and services.
Physical Capital
Any man made tool used in the production of a good or a service.
Human Capital
knowledge or training utilized by workers (labor) in the production of a good.
Consumer Goods
Any good produced for direct consumption by consumers
Capital Goods
Any good produced for indirect consumption by consumers
Positive Statements
Statements based upon facts
Normative Statements
Statements that include value judgements
Marginal Analysis
Decisions based upon the additional benefit and additional cost.
Utility
Satisfaction
Marginal Utility
The additional utility generated from the addition of one more unit of something.
Shortage
When a producer cannot afford to offer goods or services at current prices.
Price
The amount a buyer pays for a good or service
Cost
The amount a producer pays to produce a good or service
Investment
Money spend by businesses to improve their production
Entrepreneur
An ambitious business leader who's quest for profit leads them to develop and market new goods and services.
Production Possibilities Curve
An economic model that shows the alternative ways that an economy can utilize it's scarce resources.
Ceteris Parabis
"All else remains equal (or the same)"
Productive Efficiency
Products are being produced in the least costly way
Allocative Efficiency
The products being produced are the ones that are most desired by society
Laissez Faire
"Let it be" the economic phrase that refers to the government not intervening in a market.
Command Economy
An Economy where the productive resources are allocated by the government.
Free Market Economy
Economy where the productive resources are allocated by private businesses and individuals. Driven by profit motive.
Mixed Market Economy
Economy where resources are allocated by private businesses, individuals and varying degrees of government intervention.
"The Invisible Hand"
Adam Smith's idea economies are driven by profit motive and regulated by competition.
Absolute Advantage
When a person, company, or country can produce a good or service at a lower cost than another can.
Comparative Advantage
When a person, company, or country can produce a good or service at a lower opportunity cost than another can.
Microeconomics
The study of the small units within the economy.
Macroeconomics
The study of large economic systems.
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