AP econ unit 1 vocab

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Substitution

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28 Terms

1

Substitution

________ effect: the change in QDemanded resulting from a change in the price of one good relative to the price of other goods.

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2

Human capital

________: the amount of knowledge and skills that labor can apply to the work they do and the general level of health that the labor force enjoys.

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3

scarce resources

Trade- offs: ________ imply that individuals, firms, and governments are constantly faced with difficult choices that involve benefits and costs.

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4

Specialization

________: when firms focus their resources on production of goods for which they have comparative advantage, they are said to be specializing.

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5

next unit

Marginal: the ________ or increment of an action.

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6

Opportunity Cost

________: the value of the sacrifice made to pursue a course of action.

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7

Normal goods

________: a good for which higher income increases DEMAND.

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8

Inferior goods

________: a good for which high income decreases DEMAND.

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9

Economic Growth

________: occurs when an economys production possibilities increase.

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10

Production Possibilities

________: different quantities of goods that an economy can produce with a given amount of scarce resources.

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11

Absolute Advantage

exists if a producer can produce more of a good than all other producers

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12

Comparative Advantage

a producer has comparative advantage if he can produce a good at lower opportunity cost than all other producers

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13

Economics

the study of how people, firms, and societies use their scarce productive resources to best satisfy their unlimited material wants

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14

Law of Demand

There is an inverse or indirect relationship between the price of a product and the quantity of that product that consumers are willing and able to buy

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15

Law of Supply

There is a direct or positive relationship between the price of a product and the quantity of the product supplied by the producer

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16

Marginal Analysis

making decisions based up weighing the marginal benefits and costs of that action

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17

Marginal Benefit (MB)

the additional benefit received from the consumption of the next unit of a good or service

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18

Marginal Cost (MC)

the additional cost incurred from the consumption of the next unit of a good or service

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19

Marginal

the next unit or increment of an action

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20

Productive Efficiency

production of maximum output for a given level of technology and resources

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21

Productivity

the quantity of output that can be produced per worker in a given amount of time

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22

Resources

called factors of production, these are commonly grouped into the four categories of labor, physical capital, land or natural resources, and entrepreneurial ability

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23

Scarcity

the imbalance between limited productive resources and unlimited human wants

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24

Substitute goods

two goods are consumer substitutes if they provide essentially the same utility to the consumer

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25

Substitution effect

the change in QDemanded resulting from a change in the price of one good relative to the price of other goods

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26

Technology

a nations knowledge of how to produce goods in the best possible way

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27

Trade-offs

scarce resources imply that individuals, firms, and governments are constantly faced with difficult choices that involve benefits and costs

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28

Utility

The use or satisfaction that a good or service provides to a consumer

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