ap macro -- unit 1

scarcity

scarce resources satisfy needs and wants

resources

land, labor, and capital

macroeconomic solution to scarcity

enhancing resources through investment

saving

loaning money to earn interest

investing

buying capital

comparative advantage

lower opportunity cost

absolute advantage

who has more stuff (who can produce more)

market system

resources owned privately

personal gain dictates resource use

efficient outcomes

command system

government owns all resources

no profit/personal gain motive

planned resource use - inefficient outcomes

mixed system

public and private ownership of resources

households buy goods + services from the

product market

households supply resources (LLC) to the

factor market

the factor market buys resources from

businesses

the factor market sells LLC to

households

businesses buy resources from the

factor market

businesses supply rent, wages, & interest to the

factor market

the product market buys goods + services from

businesses

the product market supplies payments to

businesses

households buy goods + services from the

product market

price floor

minimum price (price too high)

creates surplus

price ceiling

maximum price (price too low)

creates shortage

supply curve

supply of savings

demand curve

demand to borrow money for investment

quantity

level of investment in the economy