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AP Macroeconomics Unit 1

Terms in this set (50)

Economics
the study of how people try to satisfy seemingly unlimited wants with limited resources; the study of how society allocates scarce resources
factors of production
inputs or resources that go into the production function to produce goods and services: land, labor, capital, entrepreneurship
Inputs
Resources such as people, raw materials, energy, information, or finance that are put into a system (such as an economy, manufacturing plant, computer system) to obtain a desired output. Inputs are classified under costs in accounting.
Capital
resources (buildings, machinery, and equipment) used to produce goods and services; also called investment goods.
Microeconomics
portion of economics concerned with the individual elements that make up the economy; households, firms, government, and resource input prices
macroeconomics
the portion of economics concerned with the overall performance of the economy; focused on aggregate demand-aggregate supply relationship, and the resultant output, income, employment, and price levels
positive economics
(as opposed to normative economics) is the branch of economics that concerns the description and explanation of economic phenomena. It focuses on facts and cause-and-effect behavioral relationships and includes the development and testing of economics theories.
normative economics
(as opposed to positive economics) is a part of economics that expresses value or normative judgments about economic fairness or what the outcome of the economy or goals of public policy ought to be.
ceteris paribus
with other conditions remaining the same.
Scarcity
the imbalance between limited productive resources and unlimited human wants
opportunity cost
the value of the sacrifice made to pursue a course of action
model
a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation; economists use the term model instead of theory; models are used to test theories; an applied or empirical representation
Production possibilities
the different quantities of goods that an economy can produce with a given amount of scarce resources
constant costs
An industry in which the ratio comparing units produced to production cost per unit remains the same regardless of industry volume or demand growth. This supply-curve equilibrium occurs when input costs do not increase in response to increased demand.
law of increasing opportunity cost
the principle that as the production of a good increases, the opportunity cost of producing an additional unit rises.
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