AP Macro - CH 1 "Basic Economics" Vocab

Economics

the study of scarcity and choice

Economic Perspective

a way of looking at events of phenomena from a monetary standpoint

Scarcity

 when a resource is not available in sufficient qualities to satisfy all the various ways a society can use it

Opportunity costs

the real cost of an item; what you must give up in order to get it

Utility

refers to the total satisfaction or benefit from consuming a good or service; a way to measure how much fulfillment a person needs to satisfy a want or need

Marginal Analysis

the study of the costs and benefits of doing a little bit more of an activity versus a little bit less

Economic Principle

fundamental concepts and theories that explain how an economy functions and how people use limited resources to satisfy unlimited wants

Other-things-equal-assumption

a shorthand indication of the effect one economic variable has on another, provided all other variables remain the same

Microeconomics

the study of how people make decisions and how people make decisions and how those decisions interact; focuses on the choice made by individuals

Macroeconomics

concerns the overall ups and downs in the economy; focuses on the bigger picture

Aggregate

economic measures that summarize data across many different markets

Positive economics

branch of economic analysis that describes the way the economy works

Normative economics

makes prescriptions about the way the economy should work

Economizing problem

 the need to make choices because economic wants exceed economic means; society’s material wants are unlimited while resources are scarce/limited

Budget line

graph that shows all the possible combinations of 2 goods that a consumer can buy with a given income prices

Economic resources

anything that can be used to produce something else

Land

refers to all resources that come from nature

Labor

the effort of workers

Capital

refers to manufactured goods used to make other goods and services

Entrepreneurship

describes the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production process

Consumer goods

products that are purchased for consumption and not produce other consumer goods

Capital goods

physical assets or resources that are used to produce goods and services, but are not directly consumed

Production possibilities curve

a graphical model that represents all of the different combinations of 2 goods that can be produced; measures production efficiency

Law of increasing opportunity costs

an economic principle that describes tradeoffs that come with pursuing a specific goal or project

Economic growth

an increase in the amount of goods and services produced compared to one period of time to another

Inflation

the rate at which prices increase over a period of time

Deflation

general decline in the general price level of goods and services

Unemployment

the state of being without a paid job, but being able and willing to work

Employment

working at least one hour a week for some form of payment, such as wage, commission, or profit

Labor force

he sum of the employed plus the unemployed

Recession

a period of sustained economic decline

Expansion

an upward trend in the business cycle, characterized by an increase in production and employment, which in turn causes an increase in the incomes and spending of households and businesses

Depression

a severe and prolonged downturn in economic activity

Business cycle

a recurring pattern of economic activity that includes periods of expansion and contradiction

Marginal analysis

an examination of the associated costs and potential benefits of specific business activities or financial decisions

Property rights

 the legal and theoretical ownership of resources and how they can be used

Gross Domestic Product (GDP)

 a measure of the total value of goods and services within a country’s borders over a specific period of time

Output

the total amount of goods and services produced within a specific time period by a country, region, industry, business, or individual

Aggregate Output

the total value of goods and services produced in an economy over a specific period of time

Efficiency

when all goods and factors of production in an economy are distributed or allocated to their most valuable uses and waste is eliminated or minimized; making the most of scarce resources to best serve everyone in an economy

Productive efficiency

the ability to produce the most output from the available resources using minimal inputs

Allocative efficiency

where the production of goods and services is aligned with consumer and producer preferences; meets the needs and wants of society

Comparative advantage

a country or individual’s ability to produce a good or service at a lower opportunity cost compared to another producer

Absolute advantage

where a country or individual can produce more of a good or service than another with the same amount of resources; overall

Market economy

 an economic system where supply and demand direct the production of goods and services; the government has little to no control 

Traditional economy

an economic system where customs and traditions are more important than money, and people use skills passed down through generations to survive

Command economy

a centralized government controls the means of production and determines output levels

Capitalism

 an economic system where private individuals or organizations own the means of production, and prices, products, and distribution are determined by competition in a free market

Authoritarian socialism

economic system where government owns or controls nearly all factors of production; government makes long range plans for the country that limit the choices of individuals

Democratic socialism

a mix of capitalism and communism; the government owns key industries/utilities, but also allows for private ownership of other industries