AP Economics

Absolute Advantage

The ability of a country, individual, or firm to produce a good or service more efficiently than another entity.

Allocative Efficiency

Optimal allocation of resources maximizing society's welfare without making anyone worse off.

Capital

Man-made goods used in production, including machinery, equipment, and technology.

Command Economy

Economic system where the government controls production and distribution.

Comparative Advantage

Country's ability to produce a good at a lower opportunity cost than others.

Consumer goods

Goods created for direct consumption.

Economic Systems

How societies organize production, distribution, and consumption of goods and services.

Entrepreneurship

Starting and managing a business venture to make a profit.

Explicit Costs

Monetary expenses in the production process.

Factors of Production

Resources like labor, capital, land, and entrepreneurship used in production.

Free-Market

Economic system where prices are determined by supply and demand without government intervention.

Implicit Costs

Non-monetary opportunity costs from choosing one option over another.

Investment

Money spent by businesses to improve production.

Labor

Human effort used in the production process.

Land

Natural resources used in production.

Marginal Benefit (MB)

Additional satisfaction from consuming one more unit of a good or service.

Marginal Cost (MC)

Additional cost incurred when producing one more unit of a good or service.

Microeconomics

Study of small economic units like individuals and firms.

Macroeconomics

Study of the entire economy or economic aggregates.

Mixed Economy

Economic system combining elements of market and command economies.

Opportunity Cost

Value of the next best alternative forgone when making a choice.

Production Possibilities Curve (PPC)

Maximum combination of goods that can be produced with limited resources.

Production Possibilities Frontier (PPF)

Model showing combinations of goods an economy can produce efficiently.

Productive Efficiency

Producing goods using the least resources while maintaining quality.

Resource Allocation

Distributing scarce resources among competing uses in an economy.

Scarcity

Limited resources compared to unlimited wants and needs.

Trade-off

Sacrifice made when choosing one option over another.

Utility

Satisfaction individuals derive from consuming goods and services.