AP econ unit 1 vocab

Substitution

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

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.

scarce resources

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

Specialization

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

next unit

Marginal: the or increment of an action.

Opportunity Cost

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

Normal goods

: a good for which higher income increases DEMAND.

Inferior goods

: a good for which high income decreases DEMAND.

Economic Growth

: occurs when an economys production possibilities increase.

Production Possibilities

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

Absolute Advantage

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

Comparative Advantage

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

Economics

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

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

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

Marginal Analysis

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

Marginal Benefit (MB)

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

Marginal Cost (MC)

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

Marginal

the next unit or increment of an action

Productive Efficiency

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

Productivity

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

Resources

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

Scarcity

the imbalance between limited productive resources and unlimited human wants

Substitute goods

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

Substitution effect

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

Technology

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

Trade-offs

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

Utility

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