AP Econ

Chapter 1

The Study of Economics

Economics

the study of scarcity and choice

Individual choice

decisions by individuals about what to do, which necessarily involve decisions about what not to do

Economy

a system for coordinating a society’s productive and consumptives activities

Market Economy

the decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions

Resource

anything that can be used to produce something else

Land

refers to all resources that come from nature, such as minerals, timber and petroleum

Capital

refers to manufactured goods used to make other goods and services

Entrepreneurship

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

Labor

the effort of workers

Captial

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 processes

Scarce

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

Opportunity Cost

what you must give up in order to get it

Microeconomics

the study of how people make decisions and how those decisions interact

Macroeconomics

concerned with the overall ups and downs in the economy

Economic aggregates

economic measures that summarize data across many different markets

Economic aggregates

economic measures that summarize data across many different markets

Positive economics

the branch of economic analysis that describes the way the economy actually works

Normative economics

makes prescriptions about the way the economy should work