AP Microeconomics Ultimate Guide (copy)

Scarcity

The situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Microeconomics

The branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of resources.

Macroeconomics

The branch of economics that studies the behavior and performance of an economy as a whole, including issues such as unemployment, inflation, and national income.

Factors of Production

The resources used to produce goods and services, which include land, labor, capital, and entrepreneurship.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Trade-offs

The alternatives that are given up when making a decision.

Positive Economics

The branch of economics that focuses on objective analysis and facts about economic behavior.

Normative Economics

The branch of economics that analyzes outcomes based on subjective opinions and value judgments.

Production Possibilities Curve (PPC)

A graph that represents the maximum combinations of goods and services that can be produced with available resources.

Comparative Advantage

The ability of a party to produce a particular good or service at a lower opportunity cost than another party.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service versus what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus the price they actually receive.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good.

Equilibrium Price

The price at which quantity supplied is equal to quantity demanded.

Market Disequilibrium

A situation in which the quantity supplied does not equal the quantity demanded, leading to either a shortage or surplus.

Monopoly

A market structure where a single seller controls the entire market for a product with no close substitutes.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, and no barriers to entry or exit.

Public Goods

Goods that are nonrivalrous and nonexcludable, such as national defense or public parks.

Externality

A cost or benefit that affects a third party who did not choose to incur that cost or benefit.

Income Inequality

The unequal distribution of income among individuals or households in an economy.

Gini Coefficient

A measure of income inequality within a population, ranging from 0 to 1.

Marginal Cost

The cost of producing one additional unit of a good or service.

Marginal Revenue Product (MRP)

The additional revenue generated from employing one more unit of a factor of production.

Monopsony

A market situation in which there is only one buyer for many sellers.

Per Unit Tax

A tax imposed on each unit of a product sold.

Subsidy

A government payment that supports a business or market, intended to encourage production or consumption.