AP Microeconomics Unit 1 - Scarcity

Scarcity

the idea that resources are limited

Absolute Scarcity

Physical limitations of resources

Relative Scarcity

Value of what we give up when we choose one option over another

Opportunity Cost

Value of what we give up when we choose one option over another

Capitalists Systems Handle Scarcity by

using prices and market forces to allocate resources

Planned Economy Handles Scarcity by

Government stepping in to determine how resources are used

Free Resources

Infinitely abundant

Labor

Scare resource

Microeconomics

Study of how actors make decisions / allocations of scarce resources

Macroeconomics

study of what happens aggregate economy; assumptions based on millions of people

Four Factors of Production

Land, labor, capital, entrepeneurship

Capital

Things used to produce other thingsE

Entrepreneurship

Putting together other factors of production to actually produce things; synonymous with ‘technology’

Consumption Good

Not used to create something else

Limited Resources Cause

Potentially unlimited wants

Rivalry

One person using/consuming limits ability for others to use

Private Goods

Scare and rival; consumption by one individual prevents simultaneous consumption by others

Normative Statements

Opinion based; how someone thinks the world should be

Positive Statements

Can be tested; doesn’t have to be true