AP econ unit 1 vocab

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28 Terms

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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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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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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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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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next unit

Marginal: the or increment of an action.

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Opportunity Cost

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

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Normal goods

: a good for which higher income increases DEMAND.

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Inferior goods

: a good for which high income decreases DEMAND.

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Economic Growth

: occurs when an economys production possibilities increase.

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Production Possibilities

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

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Absolute Advantage

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

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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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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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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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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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Marginal Analysis

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

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Marginal Benefit (MB)

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

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Marginal Cost (MC)

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

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Marginal

the next unit or increment of an action

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Productive Efficiency

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

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Productivity

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

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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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Scarcity

the imbalance between limited productive resources and unlimited human wants

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Substitute goods

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

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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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Technology

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

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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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Utility

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