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AP Econ Vocab Final
Terms in this set (75)
the condition that results from society not having enough resources to produce all the things people would like to have.
the tools, equipment, machinery, and factories used in the production of goods and services.
people with all their efforts, abilities, and skills.
a risk-taker in search of profits who does something new with existing resources.
5. Consumer good:
an item intended for final use by individual.
6. Capital good:
a manufactured item used to produce other goods and services.
7. Paradox of value:
the situation in which some non-necessities have a much higher value than some necessities.
8. Factor market:
a market where productive resources are bought and sold.
9. Economic interdependence:
reliance on one another to provide the goods and services that people consume.
10. Opportunity cost:
the cost of the next best alternative use of money, time, or resources when one choice is made rather than another.
11. Command economy:
an economy in which a central authority makes most of the WHAT, HOW, and FOR WHOM decisions.
a system in which private citizens own the factors of production
13. Profit motive:
the driving force that encourages people and organizations to improve their material well-being
14. Mixed economy:
economy in which people carry on their economic affairs freely but are subject to some government intervention and regulation
a business owned and run by one person
16. Unlimited liability:
the owner is personally and fully responsible for all losses and debts of the business
a check representing a portion of the corporate earnings
a written promise to repay a loan at a later date
an amount of borrowed money
the price paid for the use of anther's money.
21. Double taxation:
the taxing of stockholders' dividends as corporate profit and again as personal income.
22. Income statement:
a report showing a business's sales, expenses, and profits for a certain period.
a non-cash charge the firm takes for the general wear and tear on its capital goods.
24. Horizontal merger:
the kind of merger in which two or more firms that produce the same kind of product join forces
25. Vertical merger:
the kind of merger in which firms involved in different steps of manufacturing or marketing join together.
26. Demand schedule:
a listing that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time.
27. Demand curve:
a graph showing the quantity demanded at each and every price that might prevail in the market.
28. Marginal utility:
the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product.
29. Income effect:
the change in quantity demanded because of a change in price that alters consumers' real income.
30. Substitution effect:
the change in quantity demanded because of the change in the relative price of the product.
products used in place of other products.
related goods where the use of one increases the use of the other.
a given change in price causes a relatively larger change in quantity demanded.
a given change in price causes a relatively smaller change in the quantity demanded
the amount of a product that would be offered for sale at all possible prices that could prevail in the market.
36. Law of Supply:
the principle that suppliers will normally offer more for sale at high prices and less at lower prices.
a government payment to an individual, business, or other group to encourage or protest certain type of economic activity.
38. Short run:
a period of production that allows producers to change only the amount of the variable input called labor.
39. Long run:
a period of production long enough for producers to adjust the quantities of all its resources, including capital.
40. Marginal product
the extra output or change in total product caused by the addition of one or more unit of variable input.
41. Diminishing returns:
the stage where output increases at a diminishing rate as more units of a variable are added.
total fixed cost.
43. Marginal cost:
the extra cost incurred when a business produces one additional unit of a product.
44. Marginal revenue
: the extra revenue associated with the production and sale of one additional unit of output.
The monetary value of a product as established by supply and demand
46. Equilibrium price:
the price that "clears the market" by leaving neither a surplus nor a shortage at the end of the trading period.
47. Price ceiling:
a maximum legal price that can be charged for a product
48. Deficiency payment:
a check sent to producers that make up the difference between the actual market price and the target price.
49. Monopolistic competition:
the market structure that has all the conditions of perfect competition except for identical products.
50. Product differentiation:
Real or imagined differences between competing products in the same industry
a market structure in which a few very large sellers dominate the industry
a market structure with only one seller of a particular product.
53. Economies of scale:
a situation in which the average cost of production falls as the firms get larger.
54. Market failure:
an event that can occur with inadequate competition, inadequate information, resource immobility, external economies, and public goods
Unintended side effect that either benefits or harms a third party not involved in the activity that caused it.
legally formed combination of corporations or companies.
57. Incidence of tax:
the final burden of the tax.
58. Tax loopholes:
exceptions or oversights in a tax law that allow some people and businesses to avoid paying taxes.
59. Regressive tax:
a tax that imposes a higher percentage rate of taxation on low incomes than on high incomes.
the Federal Insurance Contributions Act tax levied on both employers and employees for Social Security and Medicare.
61. Customs duty:
a charge levied on goods brought in from other countries.
62. Intergovernmental revenue:
Funds collected by one level of government that are distributed to another level of government for expenditures.
63. Alternative minimum tax:
the personal income rate that applies whenever the amount of taxes paid falls below some designated level.
64. Capital gains:
profits from the sale of assets held for 12 months.
65. Value-added tax:
a tax placed on the value that manufacturers add at each stage of production
66. Flat tax:
a proportional tax on individual income after a specified threshold has been reached.
67. Sin Tax:
A relatively high tax designed to raise revenue and reduce consumption of a socially undesirable product such as liquor or tobacco
68. Progressive tax:
A tax that imposes a higher percentage rate of taxation on persons with high incomes than those with low incomes.
69. Benefit Principal of Taxation
: The principal that states those who benefit from government goods and services should pay in proportion to the amount of benefits they receive.
70. Ability-to-pay principal of taxation:
The belief that people should be taxed according to their ability to pay, regardless of the benefits they receive.
71. Tax Return:
An annual report to the IRS summarizing total income, deductions, and the taxes withheld by employers.
72. Corporate Income Tax:
The tax a corporation pays on its profits
73. Per Capita:
74. Public Sector:
The part of the economy made up of federal, state, and local governments.
75. Private Sector:
The part of the economy made up of private individuals and privately-owned businesses
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