AP Micro Quiz 1

Scarcity

unlimited wants but limited resources

microeconomics

the study of small economic units (individuals and firms)

macroeconomics

the study of the larger economy (inflation, international trade)

land, labor, capital, entrepenurship

four factors of production

trade-offs

every choice has a cost and that cost is a

opportunity cost

the second best option, what you give up to gain something else

utility

satisfaction

marginal

additionalal

locate

distribute

price

what buyer pays

cost

what seller pays

profit

what seller makes

consumer goods

goods created for general consumption

capital goods

goods used to produce other goods

investment

the money spent by businesses to improve their production

productivity

the amount of output for a given amount of input

three economic questions

what goods and services should be produced?
how should these goods and services be produced?
who consumes these goods and services?

economic system

the method used by a society to produce and distribute goods and services

centrally planned economy (communism)

government owns all resources and answers all three economic questions for its people

free market economy (capitalism)

little government involvement in the economy

mixed economy

a system with free market but also some government regulation/intervention

productivity creates wealth

countries with free markets, property rights, and The Rule of Law have historically seen greater economic growth

production possibilities curve (PPC)

a model that shows alternative ways an economy can use its scarce resources

ceteris paribus

making nothing more and nothing less than predicted (never happens)

constant opportunity cost

resources are easily adaptable in a PPC for producing either goods

increasing opportunity cost

as you produce more of any good the opportunity cost (production of another good) will increase

three PPC shifters

change of resource quality/quantity
change in technology
change in trade (allows for more consumption)

capital goods and future growth

capital good growth causes positive PPC growth