AP ECON Module 1.1

Scarcity

A resource is not available in sufficinet qualities to satisfy all the various ways a society wants to use it.

Land

Refers to all resources that come from nature, such as timber, wind, and petroleum

Labor

is the effort of workers

Capital

refers to manufactured goods used to make other goods and services

Entrpreneurship

Describes the efforts of entrepenurs in organizing resources for production, taking eirsk to create new entriprises, and innovating to develop new products and production process

opportunity cost

The values of the next best alternative that you must give up in order to get the item.

Marginal benefit

the maximum amount a consumer is willing to pay for an additional unit of the good or service

Marginal cost

The additional cost a business incurs by producing one more unit of a product or service.

Microeconomics

Specific:

Product pricing, household income, individual industry, supply and demand, utility maximization.

Macroeconomics

Whole:

National income (GDP), inflation, unemployment, monetary/fiscal policy, international trade.

Positive

Positive economics focuses on objective, fact-based analysis of "what is" (e.g., "raising interest rates reduces inflation"), which can be tested and verified

Normative

Normative economics deals with subjective, value-based opinions on "what should be" (e.g., "the government should raise interest rates") to determine policy

opportunity cost

What is being given up

Factor of production

anything that can be used to produce a good or service