Khan Academy AP Mac Lesson 1

Economics

The study of how individuals and societies choose to allocate scarce resources.

Scarcity

The fact that there is a limited amount of resources to satisfy unlimited wants.

Economic Resources

also called the factors of production; these are the land (natural resources such as minerals and oil), labor (work contributed by humans), capital (tools, equipment, and facilities), and entrepreneurship (the capacity to organize, develop, and manage a business) that individuals and businesses use in the production of goods and services.

Models

graphical and mathematical tools created by economists to better understand complicated processes in economics.

Ceteris Paribus

a Latin phrase meaning "all else equal".

Agent

some entity making a decision; this can be an individual, a household, a business, a city, or even the government of a country.

Incentives

rewards or punishments associated with a possible action; agents make decisions based on incentives.

Rational Decision Making

an agent is "rational" if they use all available information to choose an action that makes them as well off as possible; economic models assume that agents are rational.

Positive Analysis

analytical thinking about objective facts and cause-and-effect relationships that are testable, such as how much of a good will be sold when a price changes.

Normative Analysis

unlike positive analysis, normative analysis is subjective thinking about what we should value or a course of action that should be taken, such as the importance of environmental factors and the approach to managing them.

Microeconomics

the study of the interactions of buyers and sellers in the markets for particular goods and services

Macroeconomics

the study of aggregates and the overall commercial output and health of nations; includes the analysis of factors such as unemployment, inflation, economic growth and interest rates.

Economic Aggregates

measures such as the unemployment rate, rate of inflation, and national output that summarize all markets in an economy, rather than individual markets; economic aggregates are frequently used as measures of the economic performance of an economy.