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AP Microeconomics Unit One Vocabulary
Skip a line after each word.
- Economics = the study of how society manages its scarce resources.
- Scarcity = limited economic resources combined with unlimited wants
- Macroeconomics = examines the behavior of entire economies
- Microeconomics = study of the choices made by economic actors such as households, companies, and individual markets. Ex. = Walmart
- Consumers = people who decide to buy things
- Producers = people who make things to satisfy consumers’ wants and needs
- Goods = physical objects that can be purchased
- Services = actions or activities that are performed for a fee
- Factor of production = 4 = natural resources, human resources, capital resources, and entrepreneurship
- Resources = anything used to create products = buildings, structures, machinery, tools, etc…
- Entrepreneurship = develop a new combination of the other factors of production, creating something of value.
- Allocate = distribute resources to satisfy the greatest number of needs
- Productivity = the level of output that results from a given level of input
- Division of labor = assigning a small number of tasks to each worker
- Specialization = when workers gain expertise in the assigned tasks – allows him to work more efficiently
- Assembly line = area where people perform a specific task in a line. Automobile
- Trade-offs = occurs when some or all of one good is sacrificed for another
- Opportunity costs = sacrifice of an alternative choice – the next best choice is sacrificed.
- Production possibilities curve = all possible combinations of two goods or services that can be produced within a stated time period given 2 assumptions = 1.Amount of available resources and technology will not change during the period being studied. 2. all of the natural, human, and capital resources are being used in the most efficient manner
- Barter = exchange of one set of goods for another = bargaining
- Interdependence = reliance among economic actors – fisherman wants an orange
- Supply = quantity of goods and services that producers are willing to offer at various possible prices during a given time period
- Demand = amount of a good or service that a consumer is willing and able to buy at various possible prices during a given time period
- Capital = goods used to produce a product
- Incentive = something that encourages you to behave in a certain way.
- Competition = economic rivalry among businesses selling similar products
- Product Market = business develop products for sale to both households and governments – households and the govt. then pay the businesses for the products
- Resource Market = exchange of resources between households, business firms and the govt., who are users of the resources.
- Marginal Changes=small incremental changes to a plan of action
- Explicit Costs = input costs that require an outlay of money by the firm
- Implicit Costs = input costs that do not require an outlay of money by the firm.
- 3 Economic Questions = What and how much to produce? How to produce it? For whom to product if for?
- Command Economy= central planners (government) answers 3 critical questions
- Market Economy = producers and consumers answer the 3 critical questions
- Mixed Marked Economy = both central planners and producers and consumers
- Law of Increasing Costs = giving up more of one thing to get more of another
- Circular Flow Diagram= a visual model of the economy that shows how dollars flow through markets among households and firms.
- Efficiency = society is getting the maximum benefits from its scarce resources.
- Equity = those benefits are distributed fairly among society’s members
- Absolute Advantage = the ability to produce a good with fewer inputs than another producer.
- Comparative Advantage = the ability to produce a good at a lower opportunity cost than another producer