AP Micro U1 PT1+PT2 Flashcards

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Economics

A social science that examines choices made in a world of scarcity

Scarcity

Limitation; Choices where wants are relatively unlimited and resources are limited

Opportunity cost

Synonym to tradeoff; what is given up to get something else

Microeconomics

Examining choices made by individual households and firms. Biggest we get is the industry level. The individual units; the pieces

Macroeconomics

Examines the choices of entire societies (state, country level, etc) in aggregate (summed up)

Traditional economy

in the world today, with populations of this size and a need for resources of this size, there are not many of this type of economy. In these economies there is self sufficiency (ex. Hunter-Gatherer)

Command economy

(centrally planned economy): In its pure state, all big economic questions are answered by the government. Govt decides what gets produced and in what quantities those things are produced, how it gets produced. Everyone is assigned a job (ex. Good at math, given the task to design buildings). Probs based on skills but not necessarily wants. Ideally, 100% employment. Econ exactly how govt dictates, no individual choice.

Pure Market Economy

No government intervention. Decisions made by private households and firms considering their own supply and demand.

Mixed economy

a system where there’s some private ownership and some govt decision making and rules.

Circular Flow Diagram

A picture of the economic interactions we have in an economy; two sides to the picture

Labor

factor of production; physical or intellectual human effort

Land and natural resources

factor of production; naturally occurring

Physical capital

factor of production; the buildings, machines, and equipment used in the production process

Entrepreneurship

factor of production; risk taking, putting their time and money behind an idea

Intermediate goods

NOT factor of production; goods produced by firms then used as part of another good

Money (in terms of production)

NOT factor of production; it simply pays for factors of production

Production Possibility Curve (PPC)

A graph showing the set of possible output combinations for 2 goods or services given the current resources and technology

Constant Cost PPC

Opportunity cost is constant; line is straight

Increasing Cost PPC

The opportunity cost gets bigger and bigger the more of a good you produce; will look like a bent/bowed line

Factors of Production (Hint: 4 of them)

1. Labor

2. Land and Natural Resources

3. Physical Capital

4. Entrepreneurship