AP Micro (Unit 1)

Vocabulary flashcards covering core microeconomics principles from sections 1.1 (Scarcity), 1.2 (Resource Allocation), and 1.3 (Production Possibilities Curve).

Microeconomics

Studies the decision making process of individuals.

Individuals

Consumers who have unlimited "wants" or "desires", want to maximize their own happiness, and satisfy as many "wants" as possible.

Scarcity

The condition of having limited resources available, where there is a finite amount of most resources in the world, meaning using a scarce resource for one thing prevents using it for something else.

Trade-off

Having to make a choice.

Rival Goods

Resources or goods that get used up.

Non-rival Goods

Resources that are not depleted with use.

Resources

Inputs used to make goods (materials).

Land

A factor of production that includes any natural resources (such as water) and earns rent.

Labor

A factor of production representing the effort that humans contribute (such as farmers) and earns wages.

Capital

A factor of production that includes machinery, tools, and buildings (such as a truck) and earns interest.

Entrepreneurship

A factor of production that combines land, labor, and capital in new ways (such as a CEO running a farmer company) and earns economic profit.

Command Economy

An economic system where the government owns and decides, answering all production questions, controlling resources, deciding what to produce and how, and allocating products.

Market Economy

An economic system where individuals own resources and make all decisions, controlling all factors of production while prices guide individual choices.

Mixed Economy

An economic system where some resources are owned by the government and some are owned by individuals and private entities.

Capital Goods

Machinery, buildings, tools, and equipment that are produced to be used by other companies in their production process, which may increase possible production in the long run.

Consumer Goods

Goods like food, clothing, headphones, and toys that are sold to consumers and used as a final good to satisfy individual wants.

Opportunity Cost

Refers to what you had to "give up" in order to use a particular resource; defined as the cost or value of the next best alternative.

Constant Opportunity Cost

Occurs when the opportunity cost remains unchanged, resulting in a Production Possibilities Curve (PPC) that is a straight line.