AP Macro Unit 1 Flashcards

10453836500	economics	science of scarcity (study of choices)	0
10453837222	scarcity	unlimited wants, but limited resources	1
10453837941	microeconomics	Study of small economic units such as individuals, firms, and industries (ex: supply and demand in specific markets, production costs, labor markets, etc.)	2
10453839974	macroeconomics	Study of the large economy as a whole or economic aggregates (ex: economic growth, government spending, inflation, unemployment, international trade etc.)	3
10453843293	theoretical economics	generalizations & abstractions to make theories	4
10453844647	policy statement	theories applied to fix problems or meet economic goals	5
10457670928	positive economics	fact based, avoid value judgement (what is)	6
10453845706	normative statement	include value judgement (what should be)	7
10453846225	5 key economic assumptions	1) scarcity, 2) trade-off, 3) self-interest, 4) marginal costs & marginal benefits, 5) real life explained through simplified models	8
10453852028	marginal analysis	making decisions based on increments (examples: going to the mall)	9
10453853698	trade-offs	all alternatives given up when making a choice	10
10453854827	opportunity cost	most desirable alternative given up in a choice	11
10453855930	utility	satisfaction	12
10453857116	marginal	additional (or change)	13
10453857117	allocate	distribute	14
10453858632	price	amount buyer pays	15
10453858633	cost	amount seller pays to produce a good	16
10453859287	investment	money spent by businesses to improve production	17
10453861739	consumer goods	created for direct consumption (pizza)	18
10453862670	capital goods	created for indirect consumption (oven)	19
10453864023	4 factors of production	1) land: natural resources to produce goods/services, 2) labor: effort to do task for paid person, 3) capital: physical capital (human-made resource to create other goods/services) & human capital (skills/knowledge), 4)leaders who combine other factors of production to create goods/services, innovation & risk	20
10457673255	3 economic goods	what/how/for who goods/services should be produced	21
10457676091	economic systems	include command economy, mixed economy, and free market economy	22
10457677371	command economy	centrally-planned, communism, example: former Soviet Union	23
10457678766	free market economy	laissez faire, capitalist economy	24
10457683114	production possibilities curve	(ppc) (or frontier) model showing alternate ways economy can use scarce resources; graphically demonstrates scarcity, trade-offs, opportunity costs, & efficiency	25
10457685519	4 key assumptions on ppc	only 2 goods can be produced, full employment of resources, fixed resources (ceteris paribus), and fixed technology	26
10457686839	production possibilities graph	area outside is impossible/unattainable, on the line is efficient, in the area is inefficient/unemployment	27
10457688150	constant opportunity cost	resources easily adaptable for producing either good; result in straight line ppc (not common)	28
10457694416	law of increasing opportunity cost	resources not easily adaptable to produce both goods, so as produce more any good, opportunity cost (forgone production of another good) increase; result concave bowed out ppc	29
10467623525	2 types of efficiency	productive & allocative efficiency	30
10467624190	productive efficiency	being produced least costly way; any point on production possibilities curve	31
10467625394	allocative efficiency	products produced are most desired by society; optimal point on ppc depends on the society desires	32
10467630877	3 shifters of ppc	change in resource quantity of quality, change in technology, change in trade (allow more consumption but not production)	33
10472554345	per unit opportunity cost	opportunity cost/units gained	34
10472555265	absolute advantage	can produce most output or requires least amount of inputs (resources)	35
10472556029	comparative advantage	producer w/ lowest opportunity cost	36
10472557060	input	other number under (IOU)	37
10472557887	output	other number over (OOO)	38
10477834036	product market	place where goods & services produced by businesses sell to households	39
10477842687	resource (factor) market	where resources are sold to businesses (include labor, land, entrepreneurship)	40
10477846181	private sector	economy run by individuals & businesses	41
10477847281	public sector	economy controlled by gov	42
10477848053	factor payments	payments for the factors of production, namely rent, wages, interest, and profit	43
10477850058	transfer payments	when government redistributes income (welfare, social security)	44
10477851238	subsidies	gov payments to businesses	45
10477853403	circular-flow diagram	a visual model of the economy that shows how dollars flow through markets among individuals, businesses, and the gov	46
10488770857	demand	different goods quantities consumers willing & able pay to buy at different prices	47
10488771910	law of demand	inverse relationship b/t price & quantity demanded	48
10488772998	substitution effect	changes in $ motivate consumers buy relatively cheaper substitute goods	49
10488774466	income effect	changes in $ effect purchasing power of consumers' income	50
10488775644	law of diminishing marginal utility	as you continue consume a product, you'll get less additional utility (satisfaction) from each unit consumed	51
10488778361	5 shifters in demand	tastes/preferences, # of consumers, price of related goods (substitutes & compliments), income (normal goods & inferior goods), & expectations	52
10488783534	substitutes	something that can replace the product/service (milk & almond milk)	53
10488784321	compliments	something that goes with the product/service (cereal and milk)	54
10488786145	normal goods	income & demand for product directly related (includes luxury cars, sea food, houses)	55
10488788079	inferior goods	income & demand for product inversely related (such as used cars, used clothes)	56
10488789594	demand graph	a graphic representation of a demand schedule; vertical axis shows price and horizontal axis shows quantity	57
10488791046	ceteris paribus	all other things held constant (when this assumption is dropped, movement no longer occur along demand curve, entire demand curve shifts)	58
10488792691	shift	means that at same prices, more ppl willing & able purchase it (price doesn't shift curve)	59
10488797405	law of supply	direct relationship b/t price & quantity supplied	60
10488798191	supply	willing & able to sell/produce at different prices	61
10488798673	5 shifters of supply	price of resources, # of producers, technology, taxes & subsidies, expectations	62
10488800277	supply graph	a graph of the relationship between the price of a good and the quantity supplied	63
10507253962	double shift rule	if 2 curves shift at same time, either price or quantity will be indeterminate/ambiguous	64
10507257652	S & D analysis	use this to show what happens to price & quantities	65
10515473756	consumer surplus	difference b/t what you're willing to & what you actually pay; CS=buyer's max-price	66
10515480483	producer's surplus	difference b/t price seller received & how much willing sell; PS=price-seller's minimum	67
10515484084	price ceiling	max legal price seller can change for product; goal: make affordable by keeping price from reaching equilibrium; results is black market	68
10515488557	price floor	minimum legal price seller can sell product; goal keep price high by keeping price from falling to equilibrium; must be above equilibrium	69
10515494137	elasticity	show how sensitive quantity is to price change	70
10515495907	inelastic demand	quantity insensitive to price (usually necessity)	71