AP Macroeconomics Unit I: Vocab and Graphs

Vocabulary flashcards covering Section 1 and Section 2 terms from AP Macroeconomics Unit I. Includes key concepts, graph terms, and market mechanisms.

Absolute advantage

The ability of a producer to create more of a good with the same resources than competitors (or the same output with fewer resources).

Capital (goods)

Man-made inputs used to produce other goods and services (e.g., machines, factories).

Ceteris paribus (other things equal)

Assuming all other relevant factors are held constant in analysis.

Command economy

An economy in which the government makes most production and allocation decisions.

Comparative advantage

The ability to produce a good at a lower opportunity cost than others.

Deflation

A general fall in the price level across the economy.

Depression

A severe and prolonged downturn in economic activity with high unemployment.

Economics

The social science that studies how people use scarce resources to satisfy wants.

Economy

The system for producing and distributing goods and services in a country or region.

Efficient

Producing maximum output with given resources; minimal waste.

Entrepreneur

A person who organizes, manages, and bears the risks of a business venture.

Incentive

A factor that motivates people to take a particular action, such as profit or price signals.

Inflation

A general rise in the price level, reducing purchasing power.

Labor

Human effort used in production—physical and mental work.

Labor force

All employed and unemployed people actively seeking work.

Land

Natural resources used in production (land, minerals, etc.).

Marginal analysis

Evaluating the additional benefits and costs of a small change.

Macroeconomics

The study of economy-wide phenomena such as inflation, unemployment, and growth.

Market economy

An economy where decisions are guided by prices in competitive markets and private property.

Microeconomics

The study of individual agents (households, firms) and specific markets.

Model

A simplified representation used to analyze economic relationships.

Normative economics

Economic analysis based on value judgments about what ought to be.

Opportunity cost

The value of the next-best alternative forgone.

Output

The goods and services produced.

Positive economics

Objective analysis describing how the world is, based on facts and theory.

Production possibilities curve

A graph showing the maximum feasible combinations of two goods given resources and technology; illustrates trade-offs and opportunity costs.

Property rights

Legal rights to use, transfer, and benefit from resources or property.

Resource scarcity

The fundamental economic problem of having unlimited wants but limited resources.

Specialization

Focusing production on a limited range of goods to gain efficiency and output.

Terms of trade

The rate at which a country can exchange its exports for imports, determined by world prices.

Trade-off

A sacrifice of one goal for another; choosing one alternative means giving up another.

Unemployment

The condition of not having a job while actively seeking work.

Black market

An illegal market where goods or services are traded outside official channels.

Change in demand

A shift of the entire demand curve due to non-price determinants (income, prices of related goods, tastes, expectations, number of buyers).

Change in supply

A shift of the entire supply curve due to non-price determinants (input costs, technology, expectations, number of sellers, taxes/subsidies).

Competitive market

A market with many buyers and sellers, so no single actor can influence price.

Complement

A good that is often consumed with another; an increase in the price of one reduces demand for the other.

Demand curve

A graph showing the relationship between price and quantity demanded (usually downward-sloping).

Demand schedule

A table listing quantities demanded at different prices.

Equilibrium

The price and quantity at which quantity supplied equals quantity demanded.

Equilibrium (clearing) price

The market-clearing price where supply and demand are balanced.

Equilibrium quantity

The quantity bought and sold at the equilibrium price.

Inferior good

A good whose demand falls as income rises.

Input

A resource used to produce goods and services (labor, capital, land).

Law of demand

As price falls, quantity demanded typically rises, ceteris paribus.

Law of supply

As price rises, quantity supplied typically rises, ceteris paribus.

Market

Any arrangement that enables buyers and sellers to exchange goods and services at a particular price.

Minimum wage

The lowest legal hourly wage a firm may pay workers.

Normal good

A good for which demand increases as income increases.

Price ceiling

A maximum price set by the government; if binding, causes a shortage.

Price controls

Government-imposed limits on prices (ceilings and floors).

Price floor

A minimum price set by the government; if binding, causes a surplus.

Quantity demanded

The amount buyers are willing to purchase at a given price.

Quantity supplied

The amount producers are willing to offer at a given price.

Shortage

A situation where quantity demanded exceeds quantity supplied at a given price.

Substitute

A good that can replace another; an increase in the price of one raises the demand for the other.

Supply curve

A graph showing the relationship between price and quantity supplied (usually upward-sloping).

Supply schedule

A table listing quantities supplied at different prices.

Surplus

A situation where quantity supplied exceeds quantity demanded at a given price.