ap macro unit 1 terms

Money

Refers to/ recognizes how scarce something is

What is something that has a price?

Scare

Does abundancy eliminate scarcity?

No

TINSTAAFL

There is no such thing as a free lunch

Is scarcity solvable or unsolvable?

Unsolvable

Why are people and governments forced to make trade-offs?

Since scarcity is unsolvable

Are all resources limited?

Yes

Why is scarcity a problem?

Since people and governments have unlimited needs and wants but resources are limited

Production Possibilities Frontier Curve

Shows scarcity, opportunity, and trade-offs

Blue line or frontier/curve

Limit/maximum total production for a given country, economy, society, etc. (due to scarcity)

Consumer goods 

Items people will use for themselves (coffee, blueberries, etc)

Capital goods

Items used to make other things (deep fryer at Sonic)

A or Inefficient level of production (increasing unemployment)

• Not maximizing all possible resources

• Could be producing more

Where is A on the PPF curve?

UNDER THE CURVE

B or efficient, goal, desired, ideal

• Maximizing our scarce resources

• Dealing with scarcity in the best way possible; not wasting as much as point A

• raw materials, tech, labor

Where is b or efficiency on the curve?

ON THE CURVE

Does maximizing scarce resources or being at B on the curve lead to a better life?

Since lower prices and mass production which produce more things

B’ or Over extended

Pushing production/use of resources beyond a sustainable level

• ex: wwii production

Where is B’ or over extended on the curve?

JUST OUTSIDE THE CURVE

C or Not yet attainable, not yet possible (more tech needed)

• More tech needed

• Might be possible in the future

• Technology or more resources(increase of) allows person to do things they could not do before

Where is C on the curve?

OUTSIDE OF THE CURVE

What is the definition of Factors of Production?

4 items needed to produce any good or service

4 Factors of Production

• Land

• Labor

• Capital

• Entrepreneurs

Land

Physical land, natural resources like oil, coal, natural gas, metal ores, minerals

Labor

Workers

What is the most expensive factor of production?

Workers

Capital

Tools, machinery, equipment (money to buy these items)

Entrepreneurs

• Risk takers who start a business, people with ideas

• New product, better way of doing something

Absolute advantage (Best)

Who can make/produce the most of a good or service. Total production capabilities

Comparative Advantage

If you have a lower opportunity cost in producing a good/ service compared to another producer/ business/ country

Opportunity Cost

What you give up to get what you want. What you lose

Is it possible for one producer to have absolute advantage in one good, both goods, or neither good?

Yes

Is it possible to have a comparative advantage in production of both goods?

No

Demand

Desire, ability, and willingness to buy a good or service

Who controls demand?

Households or consumers/ buyers

Quantity Demand

Amount people chose to buy at a certain price

If a price is low, will buyers want to buy more or less?

More

If a price is high, will buyers want to buy more or less?

Less

What does change in price affect?

• Change in quantity demand / amount we buy

• Does not change how we feel about the item

• CAUSES MVOEMENT ALONG DEMAND CURVE

Law of Demand

Price and QD are inversely related

Does law of demand cause movement along the curve?

Yes

Would price falls result in higher or lower quantity demand?

Higher

Would a price rise result in a higher or lower quantity demand?

Lower

Demand

Changes based on certain determinants:

• Income

• Price of related goods

  • Complements and substitutes

• Tastes

• Expectation

• Number of buyers

Demand move to right?

Increase/ more demand

Demand move to left?

Decrease/ less demand

Supply

Amount of a good or service made available for purchase

Who controls supply?

Producers/ sellers/ firms

Quantity Supplied

Amount businesses chose to make

Would a business chose to make more or less if price that buyers pay is high?

More

Would a business chose to make more or less if price that buyers pay is low?

Less

Change in price

Change in quantity/supplied/ what they chose to make

• Does not change what a business can do

• Movement along the supply curve

Law of Supply

Price and quantity supply are directly or positively related

If price falls, is quantity supplied higher or lower?

Lower

If price rises, is quantity supplied higher or lower?

Higher

Supply

Can change based upon these determinants:

• Input prices

• Number of sellers

• Technology

• Government policies and expectations

Supply move to right

Increase/ more supply

Supply move to the left

Decrease/ less supply

Intersection point of a Supply and Demand Graph

Equilibrium 

Equilibrium Meaning

• Place where supply and demand curves cross/intersect

• Place where quantity supplied = quantity demanded

• Market clearing price (which is the goal)

• At that price, the numbers of buyers = number of sellers