Learn: Unit 1.1 AP Economics Review

Economics

Study of how individuals and society deal with scarcity

Scarcity

Unlimited wants, limited resources

Microeconomics

Small economic units like individuals and markets

Macroeconomics

Study of the large economy as a whole

Positive statements

Statements based on true facts, and no judgements

Normative statements

Statements based on value judgements and opinions

5 Key Economic Assumptions

Scarcity, trade offs: due to scarcity, choices must be made, self interest: everyone's goal is to make choices that maximize their satisfaction, comparison of marginal costs/benefits, and real life situations being explained through models and graphs.

Marginal

Additional

Trade-offs

All the alternativves we give up when making a choice

Opportunity cost

the most desirable alternative given up as the result of a decision

Utility

Satisfaction

Allocate

Distribute

Price

Amount buyer (or consumer) pays

Cost

The amount that the seller pays to produce a good

Investment

Money spent by firms to improve their production

Consumer goods

Created for direct consumption

Capital goods

Created for indirect consumption

Four factors of production

land: all natural resources , labor: effort a person devotes to something in which they are paid for, capital: money and human made resources that are usede to create other goods and services, entrepreneurship: ambitious people that are able to take risks and combine other factors to create goods and services